United Nuclear Corp. v. General Atomic Co.

OPINION

PAYNE, Justice.

This is an appeal from a default judgment entered against General Atomic Company (GAC) in Santa Fe District Court for its alleged willful and bad faith failure to comply with the court’s discovery orders.

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This case is by far the single largest litigation in the history of New Mexico, both in terms of the dollar value of the judgment, which approaches one billion dollars, and the sheer volume of the record, which contains more than 28,000 pages in the record proper, 13,000 pages of transcripts, thousands of documents, and over 100 depositions containing approximately 16,000 pages of testimony and 2,700 exhibits. The facts are largely disputed and are extremely complex. Although we begin with a general factual background and summary of the proceedings below, additional factual details are contained in the separate discussions of the issues raised on appeal.

This action was instituted by United Nuclear Corporation (United) against GAC, a partnership made up of Gulf Oil Corporation (Gulf) and Scallop Nuclear Corporation (Scallop).

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Scallop is a wholly-owned subsidiary of Dutch-Shell Oil Company. As amended, United’s complaint sought a declaratory judgment that two contracts under which United was to supply approximately twenty-seven million pounds of uranium to GAC were void and unenforceable. The complaint alleged that GAC and Gulf committed fraud and economic coercion, breached their fiduciary duties to United, and violated the New Mexico Antitrust Act. United also contended that its performance under the contracts had been rendered commercially impracticable. GAC counterclaimed for actual and punitive damages for United’s alleged violations of the New Mexico Antitrust Act, and for specific performance of the two contracts, or alternatively, for damages of almost eight hundred million dollars.

GAC impleaded Indiana and Michigan Electric Company (I&M), a public utility company which provides electrical service to customers in the states of Indiana and Michigan. GAC contended that if United’s obligations to supply uranium to GAC were excused, GAC’s obligations to supply uranium to I&M from the supplies United was to deliver should also be excused.

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• I&M counterclaimed against GAC for specific performance and for other relief.

The trial of this case began on October 31, 1977. It was terminated on March 2, 1978, when the trial judge entered a sanctions order and default judgment against GAC. The court found that GAC had exercised “the utmost bad faith in all stages of the discovery process.” The court entered forty-eight recitals relating to GAC’s discovery failures, twelve findings of fact as sanctions pursuant to N.M.R. Civ. P. 37 (bX2)(i), N.M.S.A. 1978, and a default judgment under N.M.R. Civ. P. 37(b)(2)(iii), N.M. S.A. 1978.

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The judgment invalidated United’s uranium supply contracts with GAC, declared that United had no other obligations to deliver uranium to GAC, and struck GAC’s defenses, counterclaims and cross-claims.

A hearing on damages followed, after which the court entered a final judgment, amended final judgment, and second amended final judgment. In addition to invalidating the United-GAC contracts, the court awarded damages to United of $8,264,723 (reduced by an offset for prepayments that had been made) and to I&M of $15,950,752. The court also granted specific performance of I&M’s contract for the supply of five million pounds of uranium from GAC.

GAC appeals from the default judgment, arguing ten main grounds for reversal. We have consolidated these points in this opinion into the following five sections: (1) The propriety of the court’s discovery orders; (2) GAC’s non-compliance with those orders and the propriety of the sanctions entered for noncompliance; (3) the court’s failure to disqualify United’s counsel; (4) the trial judge’s refusal to disqualify himself; and (5) the propriety of the remedies.

Before turning to the examination of the issues on appeal, we think it appropriate to comment on the conduct of all parties in these appellate proceedings. We have been faced with the difficult task of wading through an avalanche of motions and papers, much of which has done little to add to our understanding of this case or to expedite the ultimate resolution of it. Perhaps because of the longevity of this litigation, the acrimony which marked the proceedings in the trial court, or the monetary value of the judgment at stake, the over six hundred pages of appellate briefs filed, as well as the arguments of the attorneys in the hearings in this Court, have been filled with unnecessary “invectives, maledictions, and denunciations which we ignore.” State of Ohio v. Arthur Andersen & Co., 570 F.2d 1370, 1372 (10th Cir. 1978), cert. denied, 439 U.S. 833 , 99 S.Ct. 114 , 58 L.Ed.2d 129 (1978).

After having received the permission of this Court to file briefs which exceed by several times the length generally permitted by the Rules of Appellate Procedure, N.M.R. Civ. App. 9(k)(4), N.M.S.A. 1978, GAC and United resorted to the practice of adding additional argumentative material in a device called an appendix, without requesting or receiving permission from this Court. N.M.R. Civ. App. 9(b) and (k)(4). In addition to argument, the parties inserted other material from outside the record in these appendices, including a newspaper article and correspondence, contrary to the rules, N.M.R. Civ. App. 9(b), and to prior decisions of the Court. General Services Corp. v. Board of Com’rs, 75 N.M. 550, 552 , 408 P.2d 51, 53 (1965); Porter v. Robert Porter & Sons, Inc., 68 N.M. 97, 101 , 359 P.2d 134, 137 (1961). These we have also ignored.

Although the briefs of all three parties are articulate forensic efforts, each, in one form or another, has failed to fully comply with the rules of this Court. Neither the significance of the issues involved nor the magnitude of the dollars at stake excuses noncompliance with those rules. We take this opportunity to serve warning on the bar that this Court fully expects compliance with its rules of procedure in general and its specific orders in particular, and will not hesitate to impose the sanctions provided for in N.M.R. Civ. App. 31, N.M.S.A. 1978, in order to secure adherence to the rules and to our orders.

I.

FACTUAL BACKGROUND

To understand the issues in this appeal we must begin with a more detailed factual summary than is usual. Many entities have interacted to create the conditions from which this case arose.

A.

THE GULF URANIUM ORGANIZATION

The principal contract at issue here was entered into by Gulf and United. GAC’s predecessor was at one time a wholly-owned subsidiary of Gulf. Most of United’s allegations against GAC involve alleged wrongdoing by Gulf. Therefore, an understanding of the issues on appeal must begin with a background of Gulf’s activities in the uranium market.

In 1967, Gulf entered the uranium business by purchasing a subsidiary of General Dynamics known as General Atomic. General Atomic, which was a manufacturer of nuclear reactors, was renamed Gulf General Atomic and was operated as a subsidiary of Gulf located in San Diego, California.

In 1970, Gulf formed a new division, called Gulf Energy and Environmental Systems (Gulf Energy). Gulf General Atomic became a part of Gulf Energy. Gulf Energy was the Gulf entity involved in the marketing of uranium and the manufacture of nuclear reactors. Gulf was the only manufacturer in the United States of high temperature gas cooled reactors.

Beginning in 1967, Gulf undertook the exploration and development of uranium ore bearing properties. A Gulf division located in Denver, Gulf Minerals Resources Company (Gulf Minerals), was charged with this, the production end, of Gulf’s uranium business. One of Gulf’s first substantial uranium discoveries was made in 1967 in the Rabbit Lake area of Canada. Another wholly-owned Gulf subsidiary, Gulf Minerals Canada Limited (Gulf Canada), was responsible for the development of the Rabbit Lake uranium project. Gulf Minerals had administrative responsibility in the Gulf organization for Gulf Canada’s operations.

The following chart outlines the organization, as of 1971, of those aspects of Gulf’s uranium business operations which are essential to an understanding of this case.

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In addition to its Canadian uranium reserves, Gulf, through Gulf Minerals, began to acquire substantial uranium reserves in the United States. By 1971, it had acquired the Mt. Taylor reserves in New Mexico, which contain the largest body of uranium ore in the United States. Through Gulf Energy, Gulf also began to purchase substantial quantities of uranium on the open market from other uranium producers. Two of such purchase agreements, those Gulf and GAC entered into with United, are the principal subjects of this litigation.

B.

THE CONTRACTUAL RELATIONSHIPS OF THE PARTIES

United is a major New Mexico uranium producer. Much of the uranium it produces is used in the nuclear reactors of public utilities. In the 1960’s, United entered into the fuel fabrication market. Fuel fabrication is the process by which enriched uranium is manufactured into fuel clusters to power nuclear reactors.

In 1966, United entered into a contract to sell nuclear fuel to Commonwealth Edison, a commercial utility. It later contracted to sell fuel to I&M, and signed letters of intent to deliver fuel to Detroit Edison, Duke Power, Yankee Atomic and Consolidated Edison, all of which are also commercial utility companies. United also signed a letter of intent with Commonwealth Edison to supply it with additional fuel.

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By 1970, United’s commercial nuclear fuels business required more capital than United had or could obtain on its own. In that year, United entered into negotiations with Gulf, through Gulf Energy, to form a joint commercial light water reactor fuel fabrication business. For its part, Gulf was interested in such a business as an outlet for its uranium supply and as an opportunity to enter the fuel market for such reactors, which might provide a hedge for its high temperature reactor business.

The negotiations between Gulf and United culminated in July 1971, with the formation of a jointly owned corporation called Gulf United Nuclear Fuels Corporation (Gulf-United). The purpose of Gulf-United was to manufacture and sell nuclear fuel for commercial power reactors. United contributed its expertise in the business and some of its facilities and employees. Gulf was to contribute capital. United assigned its rights under the utility contracts to Gulf-United, thereby obligating the new corporation to supply the utilities with uranium. United in turn agreed to supply the new corporation with the uranium needed to fulfill the utility contracts. This latter agreement will be referred to as the 1971 Supply Agreement. Gulf was to supply Gulf-United with one-half of the uranium required for each existing order and letter of intent, but, upon the advice of United’s counsel, this obligation was made an option. Gulf owned fifty-seven percent of the capital stock of Gulf-United, and United owned the remainder.

From 1971 to 1973, Gulf-United was jointly operated by Gulf and United. During this period Gulf-United formalized two of the letters of intent. For reasons that are disputed, Gulf-United’s business did not prosper. In the summer of 1973, United agreed to sell its interest in Gulf-United to Gulf (the Buyout Agreement). United and Gulf then entered into a new contract, the 1973 Supply Agreement. Pursuant to this contract, which cancelled and rescinded the 1971 Supply Agreement, United agreed to sell Gulf-United the uranium needed to supply the utilities. Gulf-United continued to be obligated to supply the utilities with uranium. Thus, the 1973 Supply Agreement basically replaced the 1971 Agreement, with an upward adjustment in the price.

In November 1973, Gulf-United was merged into Gulf. Gulf then entered into a partnership with Scallop. That partnership, known as General Atomic Company (GAC), is the defendant here. Gulf transferred Gulf Energy, including Gulf General Atomic to the new partnership. In the spring of 1974, Gulf transferred the Gulf-United business operation, including the utility contracts and the 1973 Supply Agreement, to GAC. GAC thus became obligated to perform the utility contracts and acquired the right to receive uranium from United. In essence, GAC simply took over the operations of Gulf Energy and Gulf-United.

Later in 1974, the new partnership, GAC, entered into another contract with United, the 1974 Supply Agreement, whereby United became obligated to supply GAC with an additional three million pounds of uranium.

United contends that Gulf entered into the formation of Gulf-United and the 1971 Supply Agreement as part of an attempt to monopolize the uranium market, and with the specific intent of eliminating United as a competitor in the fuel fabrication and uranium mining industries. United contends that Gulf fraudulently promised to supply Gulf-United with capital and one-half of the uranium needed for the utility contracts. United alleges that as part of this monopolistic scheme, Gulf refused to honor its obligations, refused to permit Gulf-United to buy uranium on the open market, and forced United to supply all of the uranium necessary to meet Gulf-United’s needs. United argues that by deliberately mismanaging Gulf-United and withholding capital and uranium, Gulf successfully forced United to sell its interest in Gulf-United to Gulf at terms Gulf dictated and to execute the 1973 Supply Agreement. United also alleges that Gulf, acting through GAC, planned and attempted to negotiate out of its obligations to the utilities, and to then resell the uranium which United was obligated to supply at prices that Gulf had fixed. Knowing that United was in desperate financial straits, Gulf and GAC are alleged to have sought to secure a security interest on United’s Churchrock, New Mexico mine-the largest underground uranium mine in the United States-and the right to control production from that mine. GAC allegedly refused to give United any price relief. This impasse led to the filing of this case.

All of the foregoing alleged actions are asserted to have been part of a larger conspiracy to control uranium reserves in the United States. United contends that Gulf sought to accomplish this feat by tying up vast quantities of uranium through the contracts it entered into between 1972 and 1974 with other American uranium producers, in addition to the 1973 and 1974 Supply Agreements with United, and by acquiring, and then delaying the production of, uranium from Gulf’s enormous Mt. Taylor reserves.

C.

THE INTERNATIONAL URANIUM CARTEL

Several months after this case was filed, United raised a new allegation — that Gulf’s and GAC’s monopolistic efforts were part of a worldwide conspiracy of certain international uranium producers to fix the prices, allocate the markets, and control the production of uranium. United’s efforts to secure discovery of records relating to this international uranium cartel became the major focus of this litigation, and GAC’s failure to supply cartel-related information was the principal basis for the sanctions order and default judgment entered by the trial court.

The precise facts regarding the development and operation of the cartel are not completely clear, largely because full cartel-related discovery was not made in this case. However, several matters are well established.

First, as GAC concedes, there was a uranium cartel made up of various international uranium producers, which operated from at least 1972 to 1975. Foreign governments, including those of Canada, South Africa, France and Australia, played some role in the formation and operation of the cartel. The nature of the roles played by those governments, particularly by the Canadian Government, is a disputed question in this case, the resolution of which is critical to the disposition of one of the major issues raised by GAC on appeal. We will examine this question in Section II C, infra, of this opinion.

Second, it is established that Gulf, acting through Gulf Canada, was a member of the cartel no later than June 1972. It is also clear that the top executives of Gulf Energy, the immediate predecessor of GAC, were aware of the cartel and received information concerning its activities. At least two high-level officials of Gulf Energy attended one or more cartel meetings. All of these executives later became key personnel of GAC.

Third, the basic purposes of the cartel are unquestionably clear. GAC’s counsel stated to the trial court:

The purpose of [the cartel] was to set terms and conditions of sale. It was to set floor prices. And it was to set quotas and divide up who could produce how much. They were going to restrict supply. It was in its intention a cartel in every sense of the word. (Emphasis added.)

One of the Gulf attorneys who had advised Gulf that it was legal for it to join the cartel later told a Congressional subcommittee impaneled to investigate cartel activities: “There, of course, was never any doubt about what the ‘cartel’ intended to accomplish. It was to completely frustrate free competition.” International Uranium Cartel: Hearings Before the Subcomm. on Oversight and Investigation of the House Comm, on Interstate and Foreign Commerce, 95th Cong., 1st Sess., Serial No. 95-95, p. 89 (1977) [hereinafter cited as Hearings on International Uranium Cartel].

Fourth, between 1972, when the cartel apparently began, and 1975, when this suit was filed, the price of uranium in the United States increased from approximately $6.00 per pound to approximately $40.00 per pound.

Beyond these four established facts-the existence of the cartel, Gulf’s active participation therein, the cartel’s anticompetitive purposes, and the dramatic increase in uranium prices during the cartel’s existence— there is little about the cartel that is not disputed by the parties. One of the principal disputes is whether the cartel has any relevance to the contracts at issue in this litigation, which will be discussed in Section II B, infra, of this opinion.

D.

HISTORY OF THE PROCEEDINGS IN THE TRIAL COURT

In Section III A, infra, of this opinion we will discuss in detail the chronology of the proceedings in the court below in the context of analyzing GAC’s efforts to comply with the court’s discovery orders. At this point, however, it is necessary to provide a brief outline of those proceedings in order to facilitate an understanding of the overall posture of the case and the various issues on appeal.

On December 31, 1975, United filed this action in Sante Fe District Court. On the same day, United served lengthy interrogatories on GAC. This set of interrogatories will be referred to as the First Set of Interrogatories. The interrogatories called for detailed information concerning the uranium and fuel fabrication businesses of Gulf, Scallop and GAC. Many of the interrogatories specifically asked for information from “the partnership and the partners.” Neither the complaint nor the interrogatories specifically mentioned the international uranium cartel.

On April 5, 1976, GAC filed the first of two sets of answers to the First Set of Interrogatories. The answers provided no information on the cartel and virtually no information on the separate uranium business activities of Gulf and Scallop. The trial court eventually found these answers to have been “wholly inadequate and evasive.”

During the summer of 1976, extensive discovery efforts were conducted by United. GAC produced its business records, but it did not produce documents which were in the separate possession of Gulf or Scallop. On September 23, 1976, the Canadian Government promulgated the Canadian Uranium Information Security Regulations, which prohibited the release of cartel information from Canada.

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One week later, United pointed out for the first time that GAC had failed to produce documents from Gulf and Scallop. GAC then contended that it was not obligated to produce records which were in the separate possession of the partners. See Section II A, infra. The trial court rejected this argument on November 30, 1976. The court held that both the partnership and the partners were subject to its discovery orders, and it warned that sanctions would be imposed if either the partnership or the partners failed to comply with those orders.

United then moved to compel production of partner documents and supplemental answers to the First Set of Interrogatories. GAC continued to assert that partner documents were not discoverable, and the court again rejected this argument at three different hearings in January 1977. It ordered GAC to provide supplemental answers and to produce partner documents by April 15, 1977.

In February 1977, United moved to compel production of cartel-related documents Gulf had produced in other litigation. GAC resisted production of these documents, once again rearguing the question of partner discovery. GAC also suggested for the first time that United’s counsel, who had represented Gulf until November 1976 on its operations at Mt. Taylor, might have to be disqualified in this case. See Section IV, infra. On March 1, 1977, for the first time GAC specifically asserted that the Uranium Information Security Regulations were a bar to the discovery of cartel information. At a hearing on March 7, the court reiterated its previous rulings that Gulf was subject to its discovery orders, granted United’s motion to produce the cartel records, and again warned that sanctions, including a default judgment, would be imposed if good faith discovery efforts were not made. GAC then formally moved to disqualify United’s counsel. The court denied this motion. In March 1977, I&M, which had been joined as a party in January 1977, filed claims against GAC, specifically asserting Gulf’s cartel activities as a basis for the relief it sought. GAC’s supplemental answers were filed on April 15. They made no mention of the cartel.

In August 1977, United filed its Second Set of Interrogatories. This set was specifically addressed to the activities of the cartel. GAC filed objections to these interrogatories. The objections made no mention of the Uranium Information Security Regulations or any other Canadian secrecy laws. The court overruled most of the objections. GAC then filed answers to these interrogatories, which included the assertion that Canadian laws barred production of cartel documents.

United moved to compel further answers to the interrogatories and the production of cartel documents, and to have sanctions imposed. The trial court granted the request for further answers. The court found that GAC had not acted in good faith regarding the production of cartel documents up to that time. It ordered GAC to produce cartel records to the extent lawful, and to the extent that it was unlawful, to seek a waiver of Canadian nondisclosure laws. The court again warned that sanctions would be imposed if its order was not complied with.

GAC unsuccessfully sought permission from the Canadian Government to produce cartel documents located in Canada. GAC then submitted its second set of answers, which did not identify any cartel documents located in Canada or contain information from such documents.

Five days after the trial began, United again moved to compel the production of cartel documents and for sanctions for GAC’s alleged discovery failures. At a hearing on November 8, 1977, the trial judge accused GAC of “stonewalling” information. The following day, GAC moved to disqualify the judge. The motion was denied. See Section V, infra. The trial court, after a hearing, found that GAC had deliberately housed cartel documents in Canada in an attempt “to court legal impediments” to their production. It also found that GAC had violated its prior order to identify cartel documents, and it again ordered such identification.

In December 1977, United and I&M filed objections to GAC’s second set of answers to the Second Set of Interrogatories and moved to compel further answers. The trial court granted this request. On February 1, 1978, GAC filed its third set of answers. Thereafter, United filed its fourth motion for a default judgment, in which I&M joined. The trial court granted the motion, and entered the sanctions order and default judgment which is the subject of this appeal. The trial court found all issues of liability against GAC and in favor of I&M and United. The court found that GAC had acted in bad faith throughout the discovery process, and had “willfully, intentionally and in bad faith covered up” “highly relevant” information concerning the cartel and Gulf’s role therein. The court said that GAC’s answers to the First Set of Interrogatories were “wholly inadequate and evasive,” and that its series of answers to the Second Set of Interrogatories amounted to a willful, intentional, deliberate and bad faith failure and refusal to answer. See Section III, infra.

A lengthy trial on the question of damages was conducted following entry of the sanctions order and default judgment. See Section VI, infra. On May 16, 1978, the court entered a final judgment against GAC.

II.

PROPRIETY OF DISCOVERY ORDERS The first area we examine is whether the trial court’s discovery orders, which the court found GAC had willfully failed to comply with, were within the court’s authority to enter. If, as GAC contends, the court’s orders were invalid from the outset, then GAC could not have been sanctioned for its failure to comply with them.

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The orders involve the production of documents or the furnishing of information regarding the international uranium cartel. GAC contends that they were invalid for four reasons: (1) information and documents in the possession of the partners cannot be the subject of discovery orders in a case in which only the partnership, and not the individual partners, is a party; (2) the cartel documents and information are not relevant to any issue in this case; (3) adjudication of any issues regarding the cartel, and therefore, discovery orders directed at cartel-related information and documents, are barred by the act of state doctrine and the exclusive federal power over the conduct of foreign relations; and (4) the New Mexico Antitrust Act cannot be applied to the 1973 and 1974 uranium supply agreements, and therefore, the court was without jurisdiction to enter discovery orders based on appellees' allegations of violations of that Act. Each of these contentions will be separately discussed in the sections that follow.

A.

DISCOVERY OF PARTNER DOCUMENTS

GAC contends that a partner, who is not itself a party in a case brought against the partnership, may not be ordered to answer interrogatories under N.M.R. Civ.P. 33, N.M.S.A. 1978, or to produce documents under N.M.R. Civ.P. 34, N.M.S.A. 1978.

This issue arose when United served its First Set of Interrogatories on GAC. The interrogatories clearly called for information from “the partnership or partners.” See Section III A, infra, and n. 80, infra. None of these interrogatories was objected to within the time provided by Rule 33.

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GAC provided only limited information from the partners in its original answers to those interrogatories. During several months of document production that followed the filing of those answers, it did not produce any records from the partners’ files. In September 1976, United brought GAC’s failure to provide information from the partners to the attention of the trial court. In November 1976, the court ruled that the right to discovery extends to “a party partnership and the individual partners comprising the partnership, and the agents, servants, employees, directors and officers of a party or partner,” and the court warned that sanctions would be imposed “for the failure of the defendant partnership or either partner thereof to comply with specific orders of the Court directing discovery.” (Emphasis added.)

The court reiterated this ruling on at least five separate occasions in early 1977. It held that the partners “have the same obligation in relationship to discovery as the partnership,” because “[t]he partnership is not an entity in and of the cognizable law.” The court stated: “GAC has no substantive separate existence in law. It is not a separate legal entity.” GAC then argued that even if the court could order production of partnership-related documents in the possession of the partners, it could not require the partners to produce “non-partnership documents.” The court rejected this contention on at least two occasions.

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Finally, in early March 1977, GAC began to produce documents which were in the possession of the partners. A year later, the default judgment was entered after GAC failed to produce all of Gulf’s cartel records.

GAC’s argument is based on the principle that discovery under Rules 33 and 34 is limited to parties to the case. GAC argues that a partnership is a separate legal entity, and as such, only it, the named defendant in this suit, rather than the non-party constituent partners, is subject to discovery under Rules 33 and 34.

We find it unnecessary to consider the extent to which a partnership is a separate legal entity as a matter of substantive partnership law, because we conclude that under Rules 33 and 34 the trial court properly ordered GAC to produce partner documents and to furnish information from the partners.

In construing Rules 33 and 34, we must begin with the notion that discovery is designed to “make a trial less a game of blindman’s buff and more a fair contest with the basic issues and facts disclosed to the fullest practicable extent.” United States v. Procter & Gamble, 356 U.S. 677, 682 , 78 S.Ct. 983, 986-87 , 2 L.Ed.2d 1077 (1958) (citation omitted). In light of that policy, Rules 33 and 34 must be liberally construed in order to insure that a litigant’s right to discovery is “broad and flexible.” Davis v. Westland Development Company, 81 N.M. 296, 299-300 , 466 P.2d 862, 865-66 (1970). See also Goldman v. Checker Taxi Company, 325 F.2d 853, 855 (7th Cir. 1963); In Re Folding Carton Antitrust Litigation, 76 F.R.D. 420, 423 (N.D. Ill. 1977); Hart v. Wolff, 489 P.2d 114, 117 (Alaska 1971).

Rule 33 provides that interrogatories may be served only on a party, but it states that the interrogatories must be answered by the party served, or “if the party served is . a partnership, ... by any officer or agent, who shall furnish such information as is available to the party.” (Emphasis added.) In an earlier opinion concerning this litigation, we noted that Gulf is a general agent of the GAC partnership. We stated: “The agency of a partner is the hallmark of that particular form of business or professional association.” United Nuclear Corp. v. General Atomic Co., supra, 90 N.M. at 100, 560 P.2d at 164. See § 54-1-9A, N.M.S.A. 1978. If, under Rule 33, Gulf is obliged as an agent of GAC, to furnish answers to interrogatories directed at the partnership, it would be incongruous to hold that information in the possession of Gulf is not “available” to GAC for the purpose of giving complete and accurate answers to those interrogatories. Indeed, the rule that “all information available to the interrogated party must be supplied . includes information possessed by, or within the knowledge of, . . . agents or representatives of the party.” Wycoff v. Nichols, 32 F.R.D. 370, 372 (W.D. Mo. 1963) (citations omitted).

Although Rule 34 requires production of documents in the “possession, custody or control” of a party, and, unlike Rule 33, it does not specifically refer to the discovery obligations of the agents of a partnership, the principle is well established that Rules 33 and 34 are “equally inclusive in their scope.” Wilson v. Volkswagen of America, Inc., 561 F.2d 494, 513 (4th Cir. 1977), cert. denied, 434 U.S. 1020 , 98 S.Ct. 744 , 54 L.Ed.2d 768 (1978). See also Davis v. Westland Development Company, supra, 81 N.M. at 299 , 466 P.2d at 865 .

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GAC concedes that the two rules should be similarly construed, but it argues that the focus should be on the concept of “control” under Rule 34, rather than on the phrase “available” in Rule 33. However, the proper focus is not so much on one phrase or on the other, as it is on the purposes underlying each limitation on the scope of discovery under those rules. In each instance, the purposes are relatively apparent and very pragmatic. Each phrase embodies only two limitations. First, a party obviously cannot be required to produce materials which he is incapable of procuring. Second, in general a party should not be required to obtain, collect or turn over materials which the opposing party is equally capable of obtaining on its own. Konczakowski v. Paramount Pictures, 20 F.R.D. 588, 593 (S.D.N.Y. 1957); Cinema Amusements v. Loew’s, Inc., 7 F.R.D. 318, 321 (D. Del. 1947).

It is undisputed that neither United nor I&M was capable of procuring on its own the information and documents sought from the partners. Thus, the critical inquiry concerns only the first of the above mentioned principles — whether the party from whom the materials are sought has the practical ability to obtain those materials. Because the inquiry is a pragmatic one, the phrases “available” and “possession, custody or control” should not be subjected to formalistic strictures which ignore the policy of liberal discovery and the practical realities of the particular situation at issue. See Hart v. Wolff, supra, 489 P.2d at 117 . Thus, it is immaterial under Rules 33 and 34 that the party subject to the discovery orders does not own the documents,

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or that it did not prepare or direct the production of the documents,

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or that it does not have actual physical possession of them.

13

It is also clear that the mere fact that the documents are in the possession of an individual or entity which is different or separate from that of the named party is not determinative of the question of availability or control.

14

In light of the fact that partner documents were ultimately produced in this case, there can be little doubt that, as a practical matter, those documents were “available” to GAC.

15

Therefore, they were subject to discovery orders entered under Rules 33 and 34.

Our holding in this regard is not only supported by the language and underlying purposes of Rules 33 and 34, but also, it is mandated by two practical considerations. The first concerns the nature of a partnership; the second involves the business relationships of the entities involved in this ease.

A partnership is composed of and can only act through its constituent partners. As the trial judge pointed out in this case, if the discovery obligations of a partnership do not extend to the individual partners, then the partners could avoid all meaningful discovery by the simple expedient of maintaining the information and documents related to the partnership business in the separately located files of the partners, rather than in the partnership offices. Cf. C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2208, at 616 (1970) (“[A] party cannot immunize a document from inspection by turning it over to a nonparty so long as it remains in the party’s control.” (Footnote omitted.))

The second practical consideration which compels the conclusion that documents in the separate possession of the partners should be subject to production concerns the nature of Gulf uranium activities and the history of the General Atomic business operation as they relate to the issues raised in this case.

Although GAC is a partnership rather than a subsidiary of Gulf, it simply took over the business of Gulf Energy including that of Gulf General Atomic. Gulf Energy was planned to be and was operated by Gulf as one part of a coordinated, comprehensive uranium business. Thus, through Gulf Minerals, Gulf Canada and Gulf Energy, Gulf was involved in the production of uranium, the purchase and sale of uranium supplies, the fabrication of uranium fuel and the manufacture of nuclear reactors. Prior to the creation of GAC, these various Gulf divisions or subsidiaries were clearly not operationally divorced from one another.

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The transformation of Gulf Energy from a Gulf division to a partnership with Scallop changed the form of the business organization, but not the nature of the business it conducted. There was a substantial continuity of identity in the top levels of management.

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GAC succeeded to the business records of Gulf General Atomic, Gulf Energy and Gulf-United. The evidence does not indicate that when GAC took over Gulf Energy — operating an identical business, in identical offices, with the same records, and with largely the same personnel in essentially unchanged reporting relationships — it suddenly became totally divorced from the uranium activities of the partners comprising it.

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The flow of information and the transfer of key personnel from one entity to another; the past history of close coordination of activities between GAC’s predecessor and other Gulf companies; and the continuity of business purpose — all substantially refute any such implication. We fail to see how what was apparently interrelated for purposes of corporate profit became totally separate and distinct when it became the subject of discovery in litigation.

Other decisions involving discovery from distinct, though related, corporations in cases in which only one corporation is named as a party, support our conclusion that the coordinated nature of the business enterprises of separate entities may justify the imposition of discovery obligations on those entities which are not parties to the action.

In Societe Internationale, Etc. v. McGranery, 111 F.Supp. 435 (D.D.C. 1953), modified on other grounds sub nom., Societe Internationale, Etc. v. Brownell, 96 U.S.App.D.C. 232 , 225 F.2d 532 (D.C. Cir. 1955), rev’d on other grounds sub nom., Societe Internationale v. Rogers, 357 U.S. 197 , 78 S.Ct. 1087 , 2 L.Ed.2d 1255 (1958), the court ordered production of documents in the possession of a corporation, which, although related to the corporate-plaintiff, was not itself a party. The court said:

Certain it is that the court can pierce the corporate veil to determine the true character of the interests making up its composition. Subtle relationships are necessarily to be contemplated. Through the interlocked web of corporate organization, management and finance there runs the thread of a fundamental identity of individuals in the pattern of control.

Ill F.Supp. at 441-42 (citations omitted). See also In Re Uranium Antitrust Litigation, 480 F.Supp. 1138, 1153 (N.D. Ill. 1979) (“The formalities separating the two corporations cannot be used as a screen to disguise the coordinated nature of their uranium enterprise”).

These two decisions are consistent with our own in recognizing not only the practical managerial connections between the various entities, but also, the identity of financial interest in the outcome of the litigation. As GAC pointed out on this appeal, Gulf has “a very significant interest in this litigation,” and “stands to gain or lose immediately from any decision.” It should not be very startling then that we demand as the price of possible legal victory full participation in the disclosure of relevant information by those who stand to profit from the ultimate outcome. Therefore, we hold that the trial court properly concluded that documents and information in the separate possession of the partners were subject to production in a suit in which only the partnership was named as a party.

19

B.

RELEVANCY OF THE INTERNATIONAL URANIUM CARTEL

The trial court found that information concerning the international uranium cartel was “highly relevant” to United’s antitrust, fraud, and breach of fiduciary duty allegations against GAC. GAC contests this finding, asserting that the cartel, which became the principal focus of discovery, is completely unrelated to the injury allegedly suffered by United. Therefore, GAC urges that its failure to produce documents and other information regarding the cartel could not be the basis for sanctions under N.M.R.Civ.P. 37(b)(2), N.M.S.A. 1978. See Roberson v. Christoferson, 65 F.R.D. 615, 620 (D.N.D. 1975); Annot., 6 A.L.R.3d 713 , § 6 (1966). We analyze this question in light of the scope of discovery as defined by N.M.R. Civ.P. 26(b), N.M.S.A. 1978, the nature of United’s and I&M’s allegations against GAC, and the light shed on those allegations by the presently available cartel evidence.

1. The Legal Standard of Relevancy

Rule 26(b) states, in pertinent part, that a deponent

may be examined regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action, whether it relates to the claim or defense of the examining party or to the claim or defense of any other party . . . It is not ground for objection that the testimony will be inadmissible at the trial if the testimony sought appears reasonably calculated to lead to the discovery of admissible evidence. (Emphasis added.)

20

This language is subject to a broad interpretation. Fort v. Neal, 79 N.M. 479, 481 , 444 P.2d 990, 992 (1968). “Objections based on alleged irrelevancy must, therefore, be viewed in light of the broad and liberal discovery principle consciously built into” the rules of civil procedure. Independent Productions Corp. v. Loew’s, Incorporated, 22 F.R.D. 266, 271 (S.D.N.Y. 1958). “The boundaries defining information relevant to the subject matter involved in an action are necessarily vague, making it practically impossible to formulate a general rule by which they can be drawn.” La Chemise Lacoste v. Alligator Company, Inc., 60 F.R.D. 164, 170 (D.Del.1973).

21

Because courts “are not shackled with strict interpretations of relevancy,” Cox v. E. I. Du Pont de Nemours and Company, 38 F.R.D. 396, 398 (D.S.C.1965), discovery is permitted as to matters that “are or may become relevant”

22

or “might conceivably have a bearing” on the subject matter of the action,

23

or where there is “any possibility” or “some possibility” that the matters inquired into will contain relevant information.

24

Conversely, courts have said that discovery will be permitted unless the matters inquired into can have “no possible bearing upon,”

25

or are “clearly irrelevant” to the subject matter of the action.

26

Not only is the term “relevant” subject to a broad interpretation as it is generally used in the discovery context, but also it is given a particularly liberal interpretation for purposes of discovery in antitrust cases

27

2. Summary of Evidence on the Gulf Uranium Business and the Cartel

The allegations of appellees give great weight to the claim that the cartel is relevant to the subject matter of this litigation. As amended, United’s complaint named a number of distinct legal bases for the relief it sought — the invalidation of the 1973 and 1974 Supply Agreements. The complaint alleged that (1) in violation of their fiduciary duties, Gulf and GAC withheld material facts which, if disclosed, would have had a bearing on United’s decision to enter into Gulf-United and the 1971, 1973 and 1974 Supply Agreements; (2) the 1971, 1973 and 1974 Agreements were illegal and void because they had been procured through Gulf’s and GAC’s fraud; (3) Gulf mismanaged Gulf-United, refused to provide Gulf-United with uranium and capital, and economically coerced United into a position where it had no viable alternative to accepting Gulf’s requirement of the 1973 Supply Agreement; (4) Gulf tried to eliminate United as a competitor in the nuclear fuels industry and to restrict its ability to compete in the uranium business; (5) the sudden increase in the cost of producing uranium, unforeseen to all but GAC and Gulf, rendered United’s performance under the 1973 and 1974 Agreements commercially impracticable; and (6) the 1971, 1973 and 1974 Supply Agreements were void because they were in violation of New Mexico’s antitrust laws prohibiting price-fixing attempts and conspiracies to monopolize, and actual monopolization of, trade and commerce.

I&M’s counterclaim specifically alleged that by their participation in the cartel, GAC and Gulf had violated the New Mexico Antitrust Act, thereby injuring I&M. I&M also defended against GAC’s claim that performance of its obligation to supply I&M with uranium had been rendered commercially impracticable by contending that the cartel was responsible for increases in the price of uranium, and therefore, such price increases were not unforeseen by GAC and Gulf.

The evidence which has been produced in this case demonstrates that information on the cartel could be crucial to the proper resolution of this litigation. The following review of some of that evidence should not be considered to reflect a view as to the merits of appellees’ substantive claims, but rather, as support for their contention that the cartel is relevant to those claims.

In 1967, Gulf entered the uranium market by purchasing the General Atomic business. Over the next five years, Gulf purchased and began to develop various uranium ore bearing properties in the United States and Canada, including the large Mt. Taylor reserves in New Mexico. Thus, by the early 1970’s Gulf was in a position to be a leading producer of uranium, nuclear fuel fabricator, and manufacturer of nuclear reactors. See Section I A, supra. It was therefore directly in competition with United.

However, in 1971 Gulf and United formed the jointly owned company, Gulf-United, to fabricate fuel for commercial nuclear reactors, and executed the 1971 Supply Agreement. Independently of Gulf-United, Gulf also began to purchase large quantities of uranium from other American producers.

Contemporaneously with these activities, Gulf began to participate in early meetings of the cartel. Top officials of Gulf Energy (Rolander, Gallaway, Gregg, Hunter and Hoffman) were informed of the cartel’s creation and Gulf’s participation in it. Hunter, Gallaway and Rolander were the Gulf officials who negotiated the formation of Gulf-United and the execution of the 1971 Supply Agreement with United. All of these individuals later held key positions in GAC. See Section II A, supra, especially n. 16 and 17, supra. All but Gregg served on the Gulf-United board.

One document reflects that Hoffman, along with Zagnoli of Gulf Minerals in Denver, was participating in cartel discussions in Canada as early as February 1972. The same month Hunter informed Hoffman that Gulf Energy would “proceed to tie up” an additional ten million pounds of uranium. Within weeks, Gulf Energy signed agreements with two American producers to purchase in excess of that amount of uranium. In March, according to Hunter’s account, Hoffman informed the board of directors of Gulf Minerals: “We’ve taken low cost supplies now on market. . We’ve cleaned out cheap material available now.” Another document dated in the spring of 1972, which reviewed Gulf-United’s financial condition, stated that Gulf’s objective was to “minimize UNO’s [United’s] book income.”

Throughout the spring of 1972, various Gulf officials from the United States attended meetings of the cartel. In late May, Hoffman and Hunter from Gulf Energy, Allen from Gulf Minerals, and Ediger from Gulf Canada, flew to Johannesburg, South Africa for a meeting of the cartel. The available cartel evidence shows that in Johannesburg, the cartelists adopted a set of rules to govern their organization. The rules allocated markets among the participating nations, set minimum prices for uranium, and established a rigged bidding system with a lead bidder and a runner-up bidder. Under a heading labeled “Attitude Towards Competitors,” the Rules stated:

It was agreed that if a supplier not associated with the organization should quote under the minimum price, the leader will not match that quotation and the [cartel’s] Operating Committee will review the situation and decide on a course of action as soon as possible.

The Rules also provided that all quotations to fuel fabricators and nuclear reactor manufacturers “should be made on the basis of the minimum prices.”

Although the Johannesburg Rules provided for the exclusion of the United States domestic uranium market, one week after the Johannesburg meeting, Hunter, in referring to “the agreements which we have reached in the last couple of days with respect to action which we will be taking,” told Hoffman that Gulf’s “overall strategy must reflect the interrelationship existing between foreign and domestic markets.” He went on to say that “foreign and domestic marketing activities are inseparable and indeed should be treated integrally if we are to optimize the company position.” In the following paragraph, Hunter stated: “Based on input provided by Gulf Minerals, we conclude that corporation profit is greater if New Mexican production begins in 1978 rather than 1976.” Hunter then noted that “[i]n order for us to realistically appraise our U3O8 competitive position as well as to effectively sell foreign uranium, it is necessary for us to sell uranium directly to the U.S. utilities.”

The minutes of a September 5, 1972 cartel meeting indicate that the cartel was considering the prospect of taking anticompetitive actions against the foreign uranium operations of American corporations. The minutes reported:

There followed a general discussion of the impact of Westinghouse bidding in Europe. Some members thought that Westinghouse should be approached directly, whereas other views were that it would be a dangerous move. The consensus finally reached was that if the club was to survive as a viable entity, it would be necessary to delineate where the competition was and the nature of its strength, as a prelude to eliminating it once and for all. (Emphasis added.)

In September 1972, a Gulf attorney observed that “it is improbable that either the cartel structure or operation will remain static,” and warned that “the instinctive reaction of the cartel’s Operating Committee will likely be to exert pressure to suppress the new competition one way or another.” He said:

It could well be that the governments involved would tacitly approve (or effectively direct) predatory actions by the cartel producer members to suppress outside competition from any source. . (Emphasis added.)

In March 1973, Hunter, of Gulf Energy, reported that Westinghouse was trying to buy uranium to cover its “substantial foreign shortage.” Hunter stated that, if successful, the purchase “would provide Westinghouse with a potential source for U.S. reactor sales.” He said that Gulf Energy would “work with GMCL [Gulf Canada] to try to put pressure on the Australians to block the proposed arrangement.”

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Gregg, the Gulf Energy employee who became Gulf’s representative on the cartel’s Operating Committee, testified in a deposition taken in the Westinghouse uranium litigation that

Westinghouse was not necessarily singled out for discussion each and every time. There were others who were discussed from time to time, also; GE [General Electric], KWU in Germany, ASEA in Sweden, other reactor manufacturers, Exxon as a fuel fabricator, Gulf-United as a fuel fabricator, so perhaps Westinghouse was discussed more than any of the others. (Emphasis added.)

29

Beginning in early 1973, United and Gulf entered into negotiations concerning the disposition of Gulf-United. On January 23, 1973, Mr. Henry, the executive vice-president of Gulf Oil in Pittsburgh, informed the president of United:

It is our intention that any sale of the shares of Gulf [in Gulf-United], of course, will be done entirely in good faith, on a fair basis, and free of any secret or undisclosed arrangements.

GAC alleges that United had independent knowledge of the cartel, but it does not contend that in the negotiations that followed Gulf informed United of its role in the cartel.

In June 1973, Gulf executed the 1973 Supply Agreement with United; and in September it bought United’s interest in Gulf-United. In November 1973, the GAC partnership was formed, and along with the operations of Gulf Energy, the Gulf-United business was transferred to GAC.

Within nine months of the execution of the 1973 Supply Agreement and the buyout of United’s interest in Gulf-United, Gulf also purchased several million pounds of uranium from two other American producers. During the same period, it signed definitive contracts with two utilities to fornalize the letters of intent United had previously signed and assigned to Gulf-United.

By March 1974, Mr. Fowler, a GAC employee reported:

What appears to be happening is that the international producers are in effect setting the world price via

a) establishing a “floor” that is higher than the U.S. offers to buy.

b) the U.S. producers refuse to sell at any price that doesn’t give them a substantial margin above the “floor” being quoted by the non-U.S. producers.

c) Thus, in essence, the international producers can stop any transactions by constantly nudging the floor upward. In the interim, the U.S. buyer becomes

increasingly frustrated, offers a higher price in order to get some response and the cycle starts over again.

It seems likely that at some point, the mechanism will break down and if it does, there will again be price competition. However, it doesn’t appear likely the break will come in the immediate future.

Three months later, GAC signed the 1974 Supply Agreement, committing United to supply an additional three million pounds of uranium.

We accept none of the available cartel evidence as conclusive. However,' where business records such as these are produced from the files of GAC and Gulf, and where it is undisputed that a uranium cartel existed and that Gulf was a member of it, we are satisfied that cartel information is relevant to the subject matter of this litigation in general, and to the specific allegations of the parties. We look with a jaundiced eye upon any claim of irrelevancy made in the background of (1) the common identity of the individuals who negotiated the contracts at issue here and the information of Gulf-United; who participated in meetings of the cartel on behalf of Gulf or were privy to cartel information; and who later formed the top level of management of GAC; (2) the temporal proximity of cartel activities to the purchase by Gulf and GAC of substantial quantities of uranium from several major American producers — including the 1971, 1973 and 1974 Supply Agreements with United; to the formation, the buyout and the dissolution of Gulf-United; and to the creation of GAC; and (3) references to “cleaning out” and “tying up” “cheap material”; to objectives of “minimizing UNO’s [United’s] book income”; to the “inseparability of domestic and foreign uranium marketing”; to Gulf’s need to sell uranium “directly to the U.S. utilities”; to working with Gulf Canada to “block” a Westinghouse uranium purchase; to the likely need to suppress new competition “one way or another”; and most striking of all, to “the consensus,” reached by the cartel in the context of discussing an American corporation, “to delineate where the competition was and the nature of its strength as a prelude to eliminating it once and for all.” These things are not the stuff of which antitrust irrelevancy is made.

Finally, we cannot accept GAC’s argument that the cartel is irrelevant to the commercial impracticability issues in this case.

30

We cannot say that such evidence has no possible bearing on United’s claim that the cartel itself was responsible for the enormous price increases in uranium that took place contemporaneously with the operation of the cartel. If the cartel is relevant to that claim, it is no less relevant to I&M’s defense that GAC is in no position to claim commercial impracticability because, along with Gulf and the other cartelists, it was responsible for, and thus foresaw, those price increases.

3. GAC’s Arguments as to the Cartel’s Irrelevance

GAC argues that the cartel was irrelevant because United “has been unable to adduce any evidence whatsoever that the 1973 and 1974 contracts were in any way connected with the activities of the cartel.” Obviously this proposition is untenable. United sought cartel evidence in order to establish that the 1973 and 1974 Supply Agreements were connected to cartel activities in one manner or another. It makes no sense whatsoever to say that the cartel is not relevant, and therefore cartel information will not be produced, because the plaintiff who seeks such discovery has failed to produce, from what has been withheld from it, evidence to conclusively establish its case. As the court said in Beler v. Savarona Ship Corporation, 26 F.Supp. 599 (E.D.N. Y.1939):

The requirement of materiality does not . compel the person seeking discovery definitely to prove materiality before being entitled to a discovery. Such an interpretation of the rule would place upon it a narrow construction which would severely limit the bounds of the discovery procedure. It might compel a party to know what was in the documents before he had seen them. One of the basic purposes of the new Rules is to enable a full disclosure of the facts so that justice might not move blindly.

See also Radio Corporation of America v. Rauland Corporation, 18 F.R.D. 440, 444-45 (N.D.Ill.1955).

GAC further argues that the cartel cannot conceivably be relevant because by May 1971, United had “locked up” the uranium covered by the 1973 Supply Agreement through supply contracts it had directly entered into with the utilities; and second, that the cartel came into existence in 1972. Because United allegedly had committed the uranium previous to the formation of the cartel, GAC concludes that cartel activities could not possibly have been the cause of any competitive injury United might have suffered.

There are a number of reasons why this argument must be rejected. In the first place, there is a dispute in this case over the question of whether the uranium covered by the 1973 Supply-Agreement was in fact “locked up” prior to the formation of the cartel, or even prior to the execution of the 1971 Supply Agreement. Over one-half of the uranium at issue here involves the utility agreements with Detroit Edison and Duke Power. Originally, this uranium was covered by letters of intent United signed with the two utilities in 1969 and 1970, respectively. United’s contention that these were merely non-binding agreements finds some support in the record.

31

But even if we were to assume that they were binding contracts at the time of the formation of Gulf-United in 1971, and that the cartel was not formed prior to 1972, it would not necessarily follow that cartel evidence has no bearing on the issues in this case.

United contends that Gulf did not disclose a slippage in the construction of a Commonwealth Edison reactor which allegedly would have waived Gulf-United’s obligation to supply the utility with fuel, and that Gulf signed a secret “side-letter” with Duke waiving conditions which also allegedly would have denied Duke uranium. These actions were allegedly taken in order that GAC could resell the uranium covered by the 1971 and 1973 Supply Agreements at higher prices. Other allegations which would have a bearing on the case, even if the uranium had all been previously committed by United, are that Gulf wrongfully refused to supply Gulf-United with the uranium needed to fulfill the requirements of the utility contracts, wrongfully blocked Gulf-United’s efforts to purchase uranium on the open market, and wrongfully interfered with United’s efforts to independently negotiate directly with the utilities for price relief and other conditions of sale. Cartel information is relevant to United’s claim that Gulf tied up the cheap material on the market, thus denying United alternative sources of uranium to fulfill its commitments to Gulf-United and driving up uranium prices. United argues that the price increases encouraged new exploration and mining, which increased the competition for limited mining supplies and labor, and in turn caused United to incur far greater uranium production costs than it otherwise would have.

We also consider it material to GAC’s relevancy argument that Gulf apparently considered it necessary “to sell uranium directly to the U.S. utilities” in order to maintain its competitive position; and that GAC now contends that although it is not obligated to supply uranium to I&M or the other utilities,

32

United nonetheless remains obligated to supply GAC with at least a substantial portion of the uranium covered by the 1973 Supply Agreement.

Finally, even were GAC’s position sound as to United’s allegations of fraud, breach of fiduciary duty, economic coercion and antitrust violations concerning the 1973 Supply Agreement, it would have no bearing on United’s allegations concerning the 1974 Supply Agreement, or on United’s and I&M’s claims based on commercial impracticability. As to the former, GAC contends that it involved a blind transaction, and since it therefore did not know the seller, neither GAC nor Gulf could have entered into that agreement with illicit intentions towards United. However, that fact does not alone dispose of United’s claims, for even such a blind agreement could conceivably have been part of a scheme to achieve monopoly control over United States uranium reserves. As to the commercial impracticability questions, we have previously noted that even GAC does not advance a persuasive argument of irrelevancy. See n. 30, supra.

GAC vehemently contests the merits of each of the foregoing allegations, contending that all are unsubstantiated.

33

But in the discovery context, it is not the function of the trial court or of this Court to try every issue prior to the full disclosure of all relevant information.

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Nor is it

the function of counsel to rule with finality on the relevancy or irrelevancy of documents in their exclusive possession and thereby to deprive both Court and opposing counsel of an opportunity to evaluate their contentions.

Radio Corporation of America v. Rauland Corporation, supra, 18 F.R.D. at 444 . The rules call for something quite different:

Unless it is palpable that the evidence sought can have no possible bearing upon the issues, the spirit of the new rules calls for every relevant fact, however, remote, to be brought out for the inspection not only of the opposing party but for the benefit of the court which in due course can eliminate those facts which are not to be considered in determining the ultimate issues.

Hercules Powder Co. v. Rohm & Haas Co., 3 F.R.D. 302, 304 (D.Del.1943). See also La Chemise Lacoste v. Alligator Company, Inc., supra, 60 F.R.D. at 171 .

At the present stage of the litigation, we are unable to say that information concerning an international uranium cartel, which had as its avowed purpose the fixing of prices for and the allocation of markets in uranium, and which counted a constituent partner of GAC as one of its members, palpably can have no possible bearing upon the subject matter of this action. Therefore, cartel information satisfies the test of relevancy for purposes of discovery under Rule 26(b).

C,

ACT OF STATE DOCTRINE AND EXCLUSIVE FEDERAL POWER OVER FOREIGN RELATIONS

GAC’s second basis for challenging the validity of the trial court’s discovery orders involves two distinct legal principles-the act of state doctrine and the exclusive power of the federal government over the conduct of foreign relations. Although distinct, each principle is alleged to be applicable to this case because of two actions of the Canadian Government-first, the role that Government played in the international uranium cartel; and second, the Canadian Uranium Information Security Regulations. GAC contends that both principles, as applied to these actions of Canada, precluded the trial court from considering any claims concerning the cartel or Gulf’s role therein, and therefore, from entering discovery orders directed at cartel documents or information. The applicability of each of these principles will be separately examined.

1. The Canadian Government’s Role in the Cartel a .The Act of State Doctrine

The classic definition of the act of state doctrine is found in Underhill v. Hernandez, 168 U.S. 250, 252 , 18 S.Ct. 83, 84 , 42 L.Ed. 456 (1897):

Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory.

The act of state doctrine, which has “ ‘constitutional’ underpinnings,” reflects “the proper distribution of functions between the judicial and political branches of the Government on matters bearing upon foreign affairs.” Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 427-28 , 84 S.Ct. 923, 940 , 11 L.Ed.2d 804 (1964). The doctrine “derives from the judiciary’s concern for its possible interference with the conduct of foreign affairs by the political branches of the government.” Timberlane Lbr. Co. v. Bank of America, N. T. & S. A., 549 F.2d 597, 605 (9th Cir. 1976). The doctrine is a matter of federal law which is binding on state courts. Banco Nacional de Cuba v. Sabbatino, supra, 376 U.S. at 427 , 84 S.Ct. at 939 ; Republic of Iraq v. First National City Bank, 353 F.2d 47, 50-51 (2d Cir. 1965), cert. denied, 382 U.S. 1027 , 86 S.Ct. 648 , 15 L.Ed.2d 540 (1966).

GAC contends that the act of state doctrine is applicable because the Canadian Government participated in the cartel and effectively compelled Gulf, through its Canadian subsidiary, Gulf Canada, to join the cartel, transforming the cartel itself and all actions Gulf or Gulf Canada may have taken pursuant to it into the acts of a foreign state.

35

GAC asserts that judicial inquiry into the cartel and Gulf’s role therein is precluded by the act of state doctrine because such an inquiry would necessarily place in question the legitimacy of the Canadian Government’s actions.

The Canadian Government has repeatedly stated that it “initiated” the discussions which led to the formation of the cartel, and that it thereafter “participated” in that organization. It has also stated that it “approved” of the participation of Canadian uranium producers in the cartel and that Gulf participated at the Government’s “specific written request.”

36

We accept these representations of the Canadian Government. However, the initiation of the cartel and the participation therein by that Government are not sufficient alone to transform the cartel-related activities of a wholly-owned subsidiary of a corporation based in the United States into the sovereign acts of a foreign nation, and thus to immunize those activities from challenge in American courts.

It is well settled that the mere fact that a foreign government approved, authorized, tolerated, encouraged, aided, or participated in the anti-competitive actions of a private individual or corporation does not necessarily provide an act of state defense. See Cantor v. Detroit Edison Co., 428 U.S. 579, 592-93 , 96 S.Ct. 3110, 3118 , 49 L.Ed.2d 1141 (1976);

37

Continental Co. v. Union Carbide, 370 U.S. 690, 706-07 , 82 S.Ct. 1404, 1414 , 8 L.Ed.2d 777 (1962); U. S. v. Sisal Sales Corp., 274 U.S. 268, 276 , 47 S.Ct. 592, 593 , 71 L.Ed. 1042 (1927); Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287, 1293 (3d Cir. 1979); Timberlane Lbr. Co. v. Bank of America, N. T. & S. A., supra, 549 F.2d at 606 ; Linseman v. World Hockey Ass’n, supra, 439 F.Supp. at 1324; United States v. The Watchmakers of Switzerland Information Center, Inc., 1963 Trade Cas. ¶ 70,600 (S.D.N.Y.1963), order modified, 1965 Trade Cas. ¶ 70,352 (S.D.N.Y.1965); Annot., 40 A.L.R. Fed. 343 , 379-80, § 15 (1978); Baker, Antitrust Conflicts Between Friends: Canada and the United States in the Mid-1970’s, 11 Cornell Int’l L. J. 165, 177-78 (1978). In the recent case of Industrial Inv. Development v. Mitsui & Co., Ltd., 594 F.2d 48 (5th Cir. 1979), cert. denied, 445 U.S. 963 , 100 S.Ct. 1078 , 63 L.Ed.2d 318 (1980), the court said that “the instigation of foreign governmental involvement does not mechanically protect conduct otherwise illegal in this country from scrutiny by the American courts.” Id. at 52.

It is not sufficient merely to say the Government of Canada played a role in the cartel. The critical inquiry is into the nature of the role played by the foreign government, for “the very assertion of an act of state defense requires the court to examine into the nature of the conduct complained of and its relationship to the foreign sovereign.” Hunt v. Mobil Oil Corp., supra, 550 F.2d at 79 (citations omitted) (Van Graafeiland, J., dissenting). Unless a court can examine this initial issue-“whether the acts complained of are in reality the acts of the defendants or the acts of a foreign government”

38

-it cannot determine whether the act of state doctrine applies, for that doctrine requires the act in question to be “the public act of those with authority to exercise sovereign powers.” Alfred Dunhill of London, Inc. v. Cuba, 425 U.S. 682, 694 , 96 S.Ct. 1854, 1861 , 48 L.Ed.2d 301 (1976).

In each of the act of state decisions cited above, there appeared to be little doubt as to the nature of the role played by the foreign government. However, in this case, the absence of cartel discovery has made it impossible for our courts to determine the preliminary question-whether the challenged acts involve any action by the Government of Canada. There are two aspects to this dilemma.

First, neither the official statements of the Canadian Government nor the available cartel evidence fully describes the acts of the cartel or the situs of those acts. More specifically, without the cartel records, it is impossible to determine precisely what cartel-inspired actions Gulf Canada, Gulf or GAC may have taken, at whom such actions may have been directed, or where they occurred.

Second, the absence of cartel information has made it impossible to fully delineate the precise role played by the Government of Canada in the cartel; and more importantly, what specific actions, if any, Gulf was “compelled” by that Government to perform, or where those activities took place.

Without this vital information we cannot determine if the act of state doctrine is applicable, as the following hypotheticals demonstrate. First, if we assume that the cartel, as the Canadian Government has described it, was not intended to, and did not have, an adverse impact on the domestic market of the United States, then cartel activities might well be beyond the scope of American antitrust laws,

39

and shielded by the act of state doctrine.

However, we could also assume-because the absence of cartel records makes it impossible to negate the possibility-that Gulf, with the knowledge of such anti-competitive, non-United States activities and of the potential business opportunities such activities presented, went beyond the scope of the cartel as the Canadian Government defined it, and took predatory actions in the United States designed to eliminate competitors and to monopolize uranium reserves.

40

If this were the case, GAC and Gulf would not be shielded by the act of state doctrine, since the Canadian Government would have played no role in the specific anti-competitive conduct challenged in our courts. See Continental Co. v. Union Carbide, supra, 370 U.S. at 706-07 , 82 S.Ct. at 1414 ; W. Fugate, supra, at 148.

The Canadian Government has repeatedly stated that the United States was excluded from the cartel’s operations. However, Prime Minister Trudeau stated in October 1977 that although the exclusion of the domestic markets of the United States and Canada was his government’s policy, he did not rule out the possibility that some producers may have gone beyond that policy. He stated: “We have no knowledge what some companies may have done under the pretext or cover of government policy.” Official Report of House of Commons Debates, Vol. 121, No. 6, p. 224, 3rd Sess., 30th Parliament (Oct. 25, 1977).

Without the withheld cartel documents it is impossible to determine whether the limited territorial scope of that policy was adhered to by the cartel or by Gulf. Although the Canadian Government has said that the cartel did not include the United States market, the broad proscriptions of the Canadian Uranium Information Security Regulations are not similarly limited. The language of those Regulations is broad enough to encompass any documents or information concerning the uranium activities of an American corporation in the United States.

41

Thus, the breadth of the regulations effectively precludes our courts from determining whether GAC or Gulf took predatory actions against their competitors in the United States, either as part of the cartel conspiracy or completely independently of it.

It is clear that the Canadian Government does not wish to permit the courts of this country to inquire into whether Gulf exceeded the original scope of the cartel. However, whether Gulf adhered to the limited territorial scope of the cartel as Canada defined it is an inquiry that the act of state doctrine cannot preclude an American court from making. It is for the courts of this country, and not for the government of a foreign state, to determine whether our nationals took actions in our nation in violation of our laws.

42

The existence of cartel evidence indicating that the cartel might have exceeded its original non-United States scope makes it imperative that our courts be free to conduct such an inquiry in this case.

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GAC argues on appeal that United has “failed to show that the cartel either sought to or did harm United”; has “failed to show that the cartel even considered uranium producers”; and has not cited “any competent evidence that the cartel engaged in any predatory activity against anyone.” These assertions are entirely beside the point. It is inconsistent for a party to fail to produce records and to then contend that the opposing party has failed to point to any records to support its allegations. We will not accept the proposition that the broad and vague outlines of a foreign government’s activities automatically activate a doctrine which provides a total eclipse of the judicial search for the truth.

The absence of cartel records makes the second aspect of Canada’s alleged involvement in the cartel-its compulsion of Gulf Canada-equally unavailing to GAC under the rubric of the act of state doctrine.

In Interamerican Refining Corp. v. Texaco Maracaibo, Inc., 307 F.Supp. 1291, 1297-98 (D.Del.1970), the court held that where an American corporation is compelled by a foreign government to commit anti-competitive practices, such compulsion constitutes a complete defense to an antitrust action based on those practices. See also United States v. The Watchmakers of Switzerland Information Center, Inc., supra ; K. Brewster, supra, at 92-94; W. Fugate, supra, at 148-49; Annot., 12 A.L.R. Fed. 329 , 340-43, § 4 (1972); Annot., 40 A.L.R. Fed. 343 , 377-79, § 14 (1978). However, “[o]ne asserting the [sovereign compulsion] defense must establish that the foreign decree was basic and fundamental to the alleged antitrust behavior and more than merely peripheral to the overall illegal course of conduct.” Mannington Mills, Inc. v. Congoleum Corp., supra, 595 F.2d at 1293 .

The reason why the sovereign compulsion defense cannot be invoked here is because the absence of cartel records makes it impossible to determine precisely what acts, if any, were compelled, and where those acts were performed.

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The available cartel evidence bearing on the question of government compulsion is ambiguous and conflicting. The Canadian Government has stated that the participation of all Canadian uranium producers in the cartel was “a matter of Canadian Government policy,” which was “implemented through the [Canadian] Atomic Energy Control Act and Regulations.” The Government also stated it had “secured compliance with the terms of the [cartel] arrangement.” However, Prime Minister Pierre Trudeau stated in response to a question in the Canadian Parliament that the contention “about the government forcing companies into [the cartel] ... is obviously a spurious argument.” He said that “the government had a policy which authorized” the cartel and that the Government had “requested” Canadian uranium producers to act within that policy. Official Report of House of Commons Debates, Vol. 121, No. 6, p. 224, 3rd Sess., 30th Parliament (Oct. 25, 1977).

The cartel records that have been produced do not substantially clarify this issue. Initially, Gulf described its attendance at early cartel meetings as a response to “a very strong invitation” from the Government to participate in the cartel; Gulf Canada had been “forcefully invited” to attend. From the outset, however, Gulf apparently conditioned its participation upon a determination that it would not result in violations of the United States antitrust laws.

In April 1972, an associate general counsel for Gulf wrote to Gulf’s general counsel in Pittsburgh concerning “an agreement” in the making “among producers of uranium.” He stated that the producers would present their agreement to the Canadian Cabinet “for approval,” and that the Cabinet would thereafter direct the producers to participate in the agreement.

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He concluded that a decision by Gulf to participate in the cartel was necessary before the cartel’s Paris meeting on April 20-21, because “there is no point in our attending the meeting unless we have decided to go along.”

Gulf apparently decided “to go along.” Roger Allen, an attorney for Gulf Minerals in Denver, attended the cartel’s Paris meeting, along with Gulf Minerals’ president, S. A. Zagnoli. However, Gulf was nevertheless still concerned about its possible liability under United States antitrust laws. Allen told the other cartel members that “Gulf management was unwilling to take such a risk and, consequently, any participation by Gulf in the arrangement was conditioned upon receiving an expression from the U. S. Department of Justice satisfactory to Gulf.”

The following month, Gulf indicated that although it remained concerned about United States antitrust laws, it otherwise agreed “in principle with the desirability of establishing a marketing arrangement.” By June 1972, Allen was reporting that Gulf had decided that it “should not even file a White Paper with the Department of Justice. Gulf Minerals had agreed to take a business risk. . . . ” (Emphasis added.)

Although by early June 1972, Gulf had established “compulsion” as the “fountainhead” of its antitrust defense, in July 1972, Gulf officials were nevertheless describing “the nature of the Canadian Government activity in fostering the Organization” as “still a bit fuzzy.” As late as September 1972, a Gulf attorney stated that Gulf’s antitrust problem was aggravated by the “ambiguous role played by the cartel governments.” The following month, the same attorney referred to the “interchanging and ambiguous capacities in which the Canadian Government had acted.” Thus, six months after the government “compulsion” allegedly occurred, Gulf officials were still having difficulty delineating the role played by the Government.

The evidence suggests that Gulf officials took steps designed to bolster the sovereign compulsion defense by encouraging Canada to take a more explicit and less flexible position. As early as May 1972, Mr. Ediger, Gulf Canada’s president, advised Mr. Hoffman, a member of the Gulf-United board of directors and a vice-president of Gulf Energy, the predecessor of GAC, that Gulf intended

to suggest amendments [to the proposed producers’ agreement] which will emphasize the fact that our participation is a result of direction from the Canadian government. Therefore, we will likely suggest [adding language] to indicate that Gulf and UCL [Uranez Canada Limited, a German corporation] are complying at the request of the Canadian government. .

In September 1972, a Gulf attorney complimented Mr. Ediger for telling the other cartel members that “it was very important for continuity to reside in the [Canadian] Department of E.M.& R. [Energy, Mines, and Resources].” The attorney went on to say:

Whatever the occasion for expression of this position, Gulf representatives should take advantage of the occasion and recognize it as the party line. The more intricately involved the Canadian Government and any of its agencies or Departments becomes and remains in this uranium matter, the better the degree of protection for Gulf. (Emphasis added.)

One reasonable inference that can be drawn from this evidence is that Gulf wanted to be compelled by the Government of Canada; it is not particularly consistent with the notion that Gulf reacted, “in innocence and good faith, to governmental threats and pressures.” Graziano, Foreign Governmental Compulsion as a Defense in United States Antitrust Law, 7 Va.J.Int’l L. 100, 117 (1967). The evidence does not establish to our satisfaction that Gulf-acting without the intent to restrain competition-innocently responded to foreign governmental pressure. Rather, it would appear that Gulf simply decided “to take a business risk,” and thereafter did all it could to minimize that risk by establishing “the effective Canadian Government direction” that it join the cartel as “the fountainhead” of its antitrust defense.

Even if we were to assume, however, that Gulf had been effectively compelled to join and participate in the cartel operations, such compulsion might not provide an all-encompassing defense in this case, for the critical questions upon which application of the act of state doctrine turns would remain unresolved-what specific acts were compelled and where did they take place.

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United has alleged that GAC and Gulf sought to eliminate it as a competitor in the United States and to monopolize American uranium reserves. It further contends that the 1973 and 1974 Supply Agreements were part of that anti-competitive effort. Even if such actions were “compelled” by a foreign government, the act of state doctrine would provide no protection to Gulf or GAC. By definition, the act of state doctrine applies only to the acts of a foreign state “done within its own territory.” Underhill v. Hernandez, supra, 168 U.S. at 252 , 18 S.Ct. at 84 . See also Republic of Iraq v. First National City Bank, supra, 353 F.2d at 51 . “The doctrine cannot be used to excuse the commission of illegal acts within the territorial boundaries of the United States.” Linseman v. World Hockey Ass’n, supra, 439 F.Supp. at 1324 (citations omitted). Although the “compulsion” may have occurred in Canada, it is the acts that are compelled, rather than the compulsion itself, that are at issue in the present litigation. The act of state doctrine must apply to those acts if it is to apply at all.

We cannot agree with the proposition that if a foreign state compels an American corporation to take actions in the United States which are intended to and do have severe adverse consequences to free and fair trade in the United States, the American corporation is thereby immunized from the full force of the laws of its own sovereign.

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To hold otherwise would render asunder the “cornerstones of this nation’s economic policies”-the antitrust laws. United States v. First National City Bank, 396 F.2d 897, 903 (2d Cir. 1968).

Our conclusion that the act of state doctrine is inapplicable is supported by the position taken towards the cartel by those branches of the federal government that are responsible for the formulation and execution of foreign policy.

The Proposition that the act of state doctrine should not be applied where the executive or legislative branches of the federal government have indicated that the act of a foreign state is not entitled to recognition under that doctrine was first set forth in Bernstein v. N.V. Nederlandsche-Amerikaansche, Etc., 210 F.2d 375, 376 (2d Cir. 1954). See generally Annot., 12 A.L.R.Fed. 707, § 2[b] (1972). The Bernstein exception to the act of state doctrine was subsequently adopted by three members of the United States Supreme Court in First Nat. City Bk. v. Banco Nacional de Cuba, 406 U.S. 759, 767-70 , 92 S.Ct. 1808, 1813 , 32 L.Ed.2d 466 (1972). Although the Bernstein exception has never gained the support of a majority of the Supreme Court,

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neither in First Nat. City Bk. nor in any other case has the Court held that the position taken by the executive and legislative branches regarding the subject matter of the particular litigation in which the doctrine is sought to be invoked is irrelevant. The fact that those branches of the federal government which are responsible for the formulation and execution of foreign policy do not consider a certain subject to involve act of state implications is relevant to, but not dispositive of, the question of the applicability of that doctrine.

Both the executive and legislative branches have taken actions with respect to the uranium cartel which are clearly inconsistent with the notion that judicial examination of Gulf’s participation in the cartel is precluded by the act of state doctrine.

The United States Government declined to state that this litigation involves “a breach of friendly relations” between the United States and Canada. In a letter transmitting communications from the Canadian Government to the trial court, the State Department stated that it was taking “no position with regard to any of the issues raised” by those letters, and that transmittal of the letters “should not be understood as having implications with respect to the foreign affairs of the United States.”

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More significantly, the federal government has affirmatively sought to apply the laws of this country to Gulfs cartel activities. A Congressional subcommittee held hearings on the cartel. See Hearings on International Uranium Cartel, supra. A federal grand jury was impaneled to investigate the cartel. In Re Grand Jury Investigation of Uranium Industry, Misc. 78-0173, F.S. 78-0166 (D.D.C.1978). In May 1978 the Justice Department filed a criminal information against Gulf, charging it with violations of the Sherman Antitrust Act, to which Gulf pled nolo contendere. United States v. Gulf Oil Corp., Cr.No. 78-123 (W.D.Pa.1978).

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The actions taken by both the legislative and executive branches regarding the cartel, and the detailed position the Justice Department has adopted in the general area of the extraterritorial application of United States antitrust laws (see n. 50, supra), are persuasive evidence that the branches of the federal government having responsibility for the conduct of foreign affairs do not consider the cartel activities of a major United States corporation to be immune from examination by the courts of this country.

These actions are more than a simple statement that the United States Government does not consider the act of state doctrine to be applicable to specific litigation involving private parties. The Government’s position is also not merely an isolated instance involving a single corporation and a specific cartel. See n. 50, supra. Therefore, there is little danger that judicial deference to the executive branch’s position will make the judiciary “a mere errand boy for the Executive Branch which may choose to pick some people’s chestnuts from the fire, but not others.” First Nat. City Bk. v. Banco Nacional de Cuba, supra, 406 U.S. at 773 , 92 S.Ct. at 1816 (footnote omitted) (Douglas, J., concurring).

The fact that these actions involved the public enforcement of the antitrust laws, rather than a civil antitrust action by a private litigant, is immaterial. Recognition of such a distinction would further no national interest. As one commentator noted:

It would seem that where the branches responsible for formulation of foreign policy have subordinated the sensitivity of foreign governments to having their acts of a particular sort explored in American courts that, at least after a successful prosecution of the American concern, the act of state doctrine should not stand in the way of the injured competitor’s antitrust claim. In such a case, the act of state doctrine would thwart antitrust enforcement policies without furthering any separation of powers (judicial non-interference with foreign policy) values. . . . [Tjhe decision to review a foreign sovereign’s act has already been contemplated by the statute and . already occurred in a prosecution.

Note, Sherman Act Jurisdiction and the Acts of Foreign Sovereigns, 77 Colum.L. Rev. 1247, 1261 (1977) (footnote omitted).

The antitrust laws of this State and nation contemplate both public and private actions against those who may have violated them.

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They do not envision, nor should they be applied in such a way as to bring about, the anomalous situation in which the public interest is vindicated by the imposition of a fine of several thousand dollars, but in which the private interest is frustrated by enforcement of a multi-million dollar judgment against what may have been a harmed competitor. To permit such a situation to exist could further the very anti-competitive and monopolistic goals which the multi-national corporation is alleged to have sought to achieve and which the antitrust laws were designed to prevent.

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b. Exclusive Federal Power Over Foreign Relations

GAC claims that even if the act of state doctrines does not bar an American court from examining Gulf’s cartel-related actions, the principle of exclusive federal power over the conduct of foreign relations nevertheless precludes an American state court from conducting such an examination.

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GAC relies on Zschernig v. Miller, 389 U.S. 429 , 88 S.Ct. 664 , 19 L.Ed.2d 683 (1968), in which the United States Supreme Court struck down an Oregon intestacy statute as it had been applied by the Oregon Supreme Court. 243 Or. 567 , 412 P.2d 781 (1966). The Oregon statute required that, in order to take property belonging to an Oregon resident by succession or testamentary disposition, a non-resident alien had to prove that (1) American residents had a reciprocal right to inherit in the alien’s country; and (2) the non-resident alien would be able to receive “the benefit, use or control” of the proceeds of the Oregon estate “without confiscation” by his government.

In Zschernig, the Court held that, as applied, the statute constituted an impermissible intrusion by the state into foreign affairs, an area which the Court said was entrusted by the United States Constitution solely to the President and Congress. The Court said that the statute required local probate courts to launch “minute inquiries” into the nature of foreign governments, the quality of rights which those governments accorded to both American citizens and their own citizens, the credibility of the representations of officials of foreign governments, and the actual administration of foreign legal systems. 389 U.S. at 433-35 , 88 S.Ct. at 666-667 .

GAC contends that the Zschernig decision precludes state courts from exercising jurisdiction over issues relating to the foreign cartel because of the Canadian Government’s relationship to the cartel. GAC argues that because the trial court was without jurisdiction to consider the cartel-related issues, it could not enter discovery orders directing the production of cartel documents.

The Zschernig decision, which has not been applied by the United States Supreme Court outside of the limited context of the alien inheritance statutes at issue in that case, has nothing to do with this case. Unlike the statute at issue in Zschernig, the causes of action involved in this case are universally accepted by American jurisdictions-fraud, breach of fiduciary duty, commercial impracticability, economic coercion and antitrust. The effective enforcement of the antitrust laws is essential to the maintenance of free and fair business competition.

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Unlike the alien inheritance statutes in Zschernig]

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the causes of action in this case do not involve questionable attempts by states to directly affect the rights of citizens in foreign nations, nor are they related to the foreign policy attitudes of this or any other state court.

In this litigation the courts of this State have not undertaken the type of analysis that Zschernig prohibits. No pejorative criticism has been directed at Canada or any other foreign government. No minute inquiry has been made into the actual administration of foreign law by a foreign government, or into the rights that such a government affords to its own citizens. The veracity of the representations of its diplomats has not been questioned. This case involves nothing more than an inquiry into what an American corporation has done in America, a situation which finds no appropriate analogy in Zschernig or its exceedingly limited progeny.

The states of this country have little interest in how a foreign government treats its own citizens, but they have every conceivable interest in anti-competitive conduct by American corporations occurring within their own borders. Likewise, foreign governments have a legitimate interest in the rights they choose to afford their own citizens; but they have no legitimate interest in whether a state court in this country will lend its judicial processes to the enforcement of contracts entered into in the United States by corporations based in this country for the supply of a resource to be mined and milled in the United States. Our courts have done no more than seek to enforce state laws which are consistent with federal laws, and with actions of the United States Congress

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and the United States Justice Department concerning Gulf’s cartel activities. We therefore hold that neither Zschernig nor the act of state doctrine precludes the courts of New Mexico from litigating the cartel-related issues present in this case, or from seeking the production of documents which will facilitate the resolution of such litigation.

2. Canada’s Uranium Information Security Regulations

GAC also contends that the trial court’s discovery orders commanded conduct in violation of the Canadian Uranium Information Security Regulations, and were therefore prohibited by the act of state doctrine and the Zschernig decision.

a. Act of State Doctrine

Clearly, the Uranium Information Security Regulations were an act of state. They were promulgated by the Canadian Government pursuant to the Canadian Atomic Energy Control Act. They have been upheld by Canadian courts. The Regulations have been considered by both the Canadian executive and judicial branches to be in the public interest of Canada. However, it does not follow that because the Regulations were an act of state, the discovery orders were precluded by the act of state doctrine.

The trial court never ordered GAC, Gulf, or Gulf Canada to violate the Regulations, and never questioned the validity of those Regulations. In October 1977, the court ordered GAC to produce all non-privileged cartel records, “[ijnsofar as it is lawful so to do.” (Emphasis added.) The court went on to say that “to the extent that it might be a violation of Canadian law to produce . [cartel] documents housed in Canada,” GAC had an obligation to “make an immediate diligent and good faith effort to obtain a lawful waiver of or dispensation from such Canadian prohibitions and to the extent thereafter lawful at the earliest possible date, actually produce for inspection and copying of such documents.” (Emphasis added.) In subsequent orders the trial court expressly refused to order identification or production of cartel documents in violation of Canadian law. Instead, it relied on Rule 37 sanctions to redress the dilemma resulting from the absence of the documents or the identification thereof.

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Further, the act of state doctrine is inapplicable insofar as the Regulations are concerned under the decision of the United States Supreme Court in Societe Internationale v. Rogers, 357 U.S. 197 , 78 S.Ct. 1087 , 2 L.Ed.2d 1255 (1958). In that case the plaintiff, a Swiss holding company, had assets seized by the Alien Property Custodian during the Second World War pursuant to the Trading With The Enemy Act. After the War, the plaintiff filed suit against the Attorney General of the United States seeking to recover the property on the ground that it had not been an enemy within the meaning of the Act. The Government sought production of records which were in the possession of a Swiss banking company controlled by the plaintiff, which it claimed were relevant to the issue of the plaintiff’s alleged “enemy taint.” The plaintiff failed to produce the documents because Swiss law prohibited production of the records. The district court dismissed the plaintiff’s complaint, Societe Internationale, Etc. v. McGranery, 111 F.Supp. 435 (D.D.C.1953). The Court of Appeals affirmed. Societe Internationale v. Brownell, 95 U.S.App.D.C. 232 , 225 F.2d 532 (D.C.Cir. 1955). The Supreme Court unanimously reversed the two lower courts.

Two aspects of the Supreme Court’s decision are pertinent to this case-first, the propriety of a court’s order to produce records located in a foreign country whose laws prohibit disclosure of the records; and second, the appropriateness of the sanctions imposed for a party’s failure to comply with such an order where the failure is due to the proscriptions of foreign law. In this section of the opinion we are concerned only with the first question; the latter aspect is considered in Section III A, infra.

In Societe Internationale, the Court stated:

Whatever its reasons, petitioner did not comply with the production order. Such reasons, and the willfulness or good faith of petitioner, can hardly affect the fact of noncompliance and are relevant only to the path which the District Court might follow in dealing with petitioner’s failure to comply.

357 U.S. at 208 , 78 S.Ct. at 1094 (emphasis added). This passage implies that foreign nondisclosure laws are not relevant to the propriety of production orders. Rather, it states that the reason for nonproduction is relevant only to the question of appropriate sanctions for noncompliance with the order. This distinction is significant. In Re Westinghouse Elec. Corp. Uranium, Etc., 563 F.2d 992 , 997, 999 (10th Cir. 1977); Arthur Andersen & Co. v. Finesilver, 546 F.2d 338, 341 (10th Cir. 1976), cert. denied, 429 U.S. 1096 , 97 S.Ct. 1113 , 51 L.Ed.2d 543 (1977); In Re Uranium Antitrust Litigation, supra, 480 F.Supp. at 1144-48 ; Wright, “Discovery,” 35 F.R.D. 39 , 81 (1963); Note, Discovery of Documents Located Abroad in U.S. Antitrust Litigation: Recent Developments in the Law Concerning the Foreign Illegality Excuse for Non-production, 14 Va.J.Int.L. 747, 753 (1974).

In Societe Internationale the Court did not refer to the act of state doctrine or to principles of international comity. The reason for that lack of reference to these principles is simple. Neither in Societe nor in this case did the trial court order a litigant to violate the nondisclosure laws of the foreign sovereign. Neither court criticized the foreign sovereign or its laws, or engaged in .an examination of such laws or the motivations which gave rise to them. Both courts sought only to maintain the integrity of the judicial process and the efficacy of the laws upon which the cause of action in each case was based. In both cases, those laws reflected very significant policies of this country.

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b. Exclusive Federal Power Over Foreign Relations

The principles set forth in Zschernig v. Miller, supra, are inapplicable to the Uranium Information Security Regulations for largely the same reasons that the act of state doctrine does not apply. The discovery orders in this case which sought cartel document production involved none of the problems the Supreme Court was confronted with in Zschernig. See e. g., n.55, supra, and accompanying text.

D.

APPLICABILITY OF NEW MEXICO ANTITRUST ACT

The last issue we consider concerning the propriety of the trial court’s discovery orders involves the applicability of the New Mexico Antitrust Act, Sections 57-1-1 to 57-1-3, N.M.S.A.1978.

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Although GAC filed a counterclaim alleging that United had violated the New Mexico Antitrust Act, it now contends that that Act may not be applied to the specific commerce at issue in this case (the 1973 and 1974 Supply Agreements and the I&M contract) and to the activities of the international uranium cartel. GÁC argues that if the Act does not apply, discovery orders pertaining to allegations of violations of the Act could not be entered, and therefore, sanctions could not be imposed for a failure to comply with such orders.

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1. The Commerce Clause

GAC’s first contention is that the Commerce Clause of the United States Constitution

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bars the application of state antitrust laws to activities which occur exclusively or overwhelmingly in interstate and foreign commerce. GAC argues that the supply and utility contracts in this case have no immediate relationship to the State of New Mexico, and therefore, that they involve only interstate commerce. Further, GAC argues that the cartel’s operations were concerned solely with foreign commerce.

It is well settled that the federal power to regulate commerce is not exclusive, and that states have the inherent police power to regulate commerce within their borders, even though such activities may include or affect interstate and foreign commerce. Merrill Lynch, Pierce, Fenner & Smith v. Ware, 414 U.S. 117, 140 , 94 S.Ct. 383, 396 , 38 L.Ed.2d 348 (1973); Cities Service Co. v. Peerless Co., 340 U.S. 179, 186 , 71 S.Ct. 215, 219 , 95 L.Ed. 190 (1950); Southern Pacific Co. v. Arizona, 325 U.S. 761 , 766-67, 65 S.Ct. 1515, 1518-19 , 89 L.Ed. 1915 (1945); K. S. B. Tech. Sales v. North Jersey, Etc., 75 N.J. 272 , 381 A.2d 774, 784 (1977). Specifically, a state may exercise its power by removing restraints on the trade and commerce of that state even though interstate commerce may thereby be affected. Giboney v. Empire Storage Co., 336 U.S. 490, 495 , 69 S.Ct. 684, 687 , 93 L.Ed. 834 (1949); Watson v. Buck, 313 U.S. 387, 403-04 , 61 S.Ct. 962, 967 , 85 L.Ed. 1416 (1941); J. Flynn, Federalism and State Antitrust Regulation 63 (1964).

The following standards for the states’ power to regulate commerce were established in Pike v. Bruce Church, Inc., 397 U.S. 137, 142 , 90 S.Ct. 844, 847 , 25 L.Ed.2d 174 (1970):

Where the [state] statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. .

If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.

See also Philadelphia v. New Jersey, 437 U.S. 617, 624 , 98 S.Ct. 2531, 2536 , 57 L.Ed.2d 475 (1978).

Thus, the first inquiry is whether the state regulation effectuates “a legitimate local public interest.” There are two aspects to this requirement. First, the type of regulation-here antitrust-must be one within the state’s inherent police powers. Second, the specific activity to which the state regulation is applied in a particular case must involve a matter of local concern which is “local in character and effect.” Southern Pacific Co. v. Arizona, supra, 325 U.S. at 767 , 65 S.Ct. at 1519 .

It has consistently been held that the type of regulation at issue here-the prevention of anti-competitive, monopolistic and predatory trade practices-is a legitimate exercise of the state’s inherent police powers. See United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 124-27, 597 P.2d at 309-12; Giboney v. Empire Storage Co., supra; German Alliance Ins. Co. v. Hale, 219 U.S. 307, 316-17 , 31 S.Ct. 246 , 55 L.Ed. 229 (1911); J. Flynn, supra, at 76-77.

GAC’s principal argument is that the second element of “a legitimate local public interest” is not present in this case because the specific contracts at issue and the uranium cartel are not “local in character and effect.” GAC relies on four points to support its position. First, the cartel had “no immediate relationship” to New Mexico and never conducted meetings in this state. GAC contends that cartel operations were “plainly in foreign commerce outside the United States.” Second, none of the entities involved in this case are incorporated in New Mexico. Third, the 1973 Supply Agreement was not executed in and does not require the performance of any act in New Mexico. Fourth, the uranium market is national in scope.

We are not persuaded that the matters at issue in this case occurred exclusively in interstate and foreign commerce and had no significant local aspects. It has been recognized that state antitrust laws may reach up to include the regulation of interstate commerce. See R. E. Spriggs Co. v. Adolph Coors Company, 37 Cal.App.3d 653 , 112 Cal. Rptr. 585, 589 (1974); J. Flynn, supra, at 71, and cases cited therein at n. 251; Wechsler, supra, 9 N.M.L.Rev. at 3. As the Massachusetts Supreme Judicial Court stated:

If State laws have no force as soon as interstate commerce begins to be affected, a very large area will be fenced off in which the States will be practically helpless to protect their citizens without, so far as we can perceive, any corresponding contribution to the national welfare.

Commonwealth v. McHugh, 326 Mass. 249 , 93 N.E.2d 751, 762 (1950) (citation omitted).

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We cannot agree that the outer limit of the exercise of that power-activity of a wholly interstate nature-has been exceeded in this case. The contracts at issue may be regarded as having no immediate relationship to New Mexico only by relying upon the formalities-the domicile of the parties to the contracts, the place of performance, and the place the contracts were entered into-and ignoring the practical realities.

United alleges that the 1973 and 1974 Supply Agreements were part of a conspiracy to monopolize uranium reserves in the United States and to eliminate it as a competitor in the uranium market. As of 1975, over one-half of the uranium reserves of the United States were located in New Mexico. In all but one year from 1966 to 1976, in excess of forty percent of the annual production of uranium in the United States came from New Mexico mines. As of 1976, over fifty percent of the uranium mining work force in this country and nearly forty percent of the uranium milling work force were located in New Mexico. Nearly one-half of the capacity of American uranium production mills is in this State. Gulf’s New Mexico Mt. Taylor uranium reserves constitute the largest uranium ore body in the United States. United’s mine at Churchrock, New Mexico, which GAC is alleged to have attempted to gain control of as part of the monopolistic conspiracy, is the largest underground uranium mine in the United States. Therefore, it would be impossible to monopolize the American uranium market without having an immediate relationship to, and a substantial effect on, the trade and commerce of this State.

Although the 1973 Supply Agreement does not formally require any activity to take place here, almost all of United’s uranium production is from New Mexico mines. New Mexico is also the site of its only uranium mill, which is the place of delivery under the terms of the 1974 Supply Agreement. In its brief on appeal, GAC conceded that New Mexico is “the state in which [United’s] operation is located.” The uranium sales efforts of GAC and its predecessors were based on Gulf production in New Mexico, foreign uranium imports, and purchases on the open market. Those purchases also included substantial amounts of New Mexico uranium. See Section II B, supra.

It is simply not the case that this litigation involves exclusively interstate commerce and that this State has no interest in its adjudication. United Nuclear Corp. v. General Atomic Co., supra, 90 N.M. at 101-02, 560 P.2d at 165-66. Therefore, we hold that the State of New Mexico has “a legitimate local public interest” in the application of its antitrust laws to this case.

The remaining inquiries are whether the state law as applied here (1) “regulates evenhandedly” and (2) has only “incidental” effects on interstate commerce. There is clearly nothing in the New Mexico Antitrust Act or in its application to this case which entails any discrimination against interstate goods or which favors local commerce over the commerce of sister states. Compare Exxon Corp. v. Governor of Maryland, 437 U.S. 117, 125-26 , 98 S.Ct. 2207, 2213-14 , 57 L.Ed.2d 91 (1978) with Dean Milk Co. v. Madison, 340 U.S. 349 , 71 S.Ct. 295 , 95 L.Ed. 329 (1951). GAC makes no contention to the contrary.

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Further, GAC has made no showing whatsoever that the application of state antitrust laws to this case will have any adverse effects on “the free flow of commerce across state lines.” Southern Pacific Co. v. Arizona, supra, 325 U.S. at 770 , 65 S.Ct. at 1521 . The very purpose of these laws is to remove privately created restraints on free trade.

Consequently, it would be difficult to prove that a policy which removes privately instituted interferences, delays, interruptions, and inconveniences with interstate commerce, is itself a delay, interference, interruption, and inconvenience to interstate commerce when enforced at the local level by the states.

J. Flynn, supra, at 84.

GAC nevertheless contends that because the uranium market is “national in scope,” and because uranium is “vital to the military posture of the United States” and to federal energy policy, “legal and policy questions involving uranium and the uranium industry must be addressed uniformly by the federal government.” GAC argues that application of state antitrust laws to such matters “is too fraught with a potential for inconsistent results, lack of uniformity, and consequent burdens upon interstate commerce.”

GAC places principal reliance on Flood v. Kuhn, 407 U.S. 258 , 92 S.Ct. 2099 , 32 L.Ed.2d 728 (1972), aff’g, 443 F.2d 264 (2d Cir. 1971), aff’g 316 F.Supp. 271 (S.D.N.Y. 1970), in which the Supreme Court upheld lower court rulings that the reserve clause in professional baseball contracts was not subject to challenge under state antitrust laws. Previous decisions of the Supreme Court had held that professional baseball was not subject to federal antitrust laws. Toolson v. New York Yankees, 346 U.S. 356 , 74 S.Ct. 78 , 98 L.Ed. 64 (1953); Federal Club v. National League, 259 U.S. 200 , 42 S.Ct. 465 , 66 L.Ed. 898 (1922). In Flood the lower courts had held that “the nationwide character of organized baseball combined with the necessary interdependence of the teams requires that there be uniformity in any regulation of baseball and its reserve system.” 316 F.Supp. at 279-80 . See 443 F.2d at 267-68 .

In affirming the lower courts’ decisions, the Supreme Court did not adopt any broad or rigid limitations on the applicability of state antitrust laws to transactions involving interstate commerce. The Court upheld those holdings “[a]s applied to organized baseball, and in the light of this Court’s observations and holdings in Federal Baseball, [and] in Toolson . . .” 407 U.S. at 284 , 92 S.Ct. at 2113.

We believe that Flood is readily distinguishable from this case. First, the time honored, though unusual, exemption from federal antitrust laws which professional baseball enjoys would be meaningless if state antitrust laws were not also inapplicable. Thus, in Flood there was a clear conflict between federal and state antitrust enforcement policies.

Second, professional baseball is significantly different from the uranium market. Baseball involves “[a] complex web of franchises, farm teams and recruiters . . .” 443 F.2d at 267 . Baseball clubs are organized into leagues and

are dependent on the league playing schedule . . . . Therefore, it is the league structure at which any state antitrust regulation must be aimed . [E]ach league extends over many states, and . . , if state regulation were permissible, the internal structure of the leagues would require compliance with the strictest state antitrust standard.

Id. at 267-68 .

No single state has a particularly significant interest in the operation of nationwide professional sports. However, this State has a very substantial relationship to uranium production, and therefore, a significant interest in preventing anti-competitive practices in the uranium industry. Moreover, in energy-related matters, unlike professional baseball, there is uniformity of treatment of anti-competitive practices under both federal and state law. Challenging such activities is federal policy. Challenging the uranium cartel and Gulf’s role therein was the federal practice.

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The fact that the uranium market is nationwide in scope does not require a different result. In Flood, state antitrust regulations would have directly affected the entire “complex web” of professional baseball, and would have been aimed at league structure. In this case, the state law has been applied solely to private contracts for the sale of specific goods. In Flood, the reserve clause being challenged was a recognized practice in the sport. Here, the alleged conspiracy was a secret attempt to dominate an industry, a practice condemned by the Congress, the Justice Department, and the courts. If the fact that the commerce at issue involved a national market was enough to render state law invalid, the states’ power to regulate anti-competitive practices would be effectively destroyed.

In Exxon Corp. v. Governor of Maryland, supra, the United States Supreme Court rejected a similar argument advanced by Gulf and other oil companies regarding the national scope of the petroleum industry and a state statute that regulated aspects of- that industry in Maryland. The Court said:

[W]e cannot adopt appellants’ novel suggestion that because the economic market for petroleum products is nationwide, no State has the power to regulate the retail marketing of gas. Appellants point out that . . . the cumulative effect of this sort of legislation may have serious implications for their national marketing operations. While this concern is a significant one, we do not find that the Commerce Clause, by its own force, preempts the field of retail gas marketing. [T]his Court has only rarely held that the Commerce Clause itself pre-empts an entire field from state regulation, and then only when a lack of national uniformity would impede the flow of interstate goods. ... In the absence of a relevant congressional declaration of policy, or a showing of a specific discrimination against, or burdening of, interstate commerce, we cannot conclude that the States are without power to regulate in this area.

437 U.S. at 128-29, 98 S.Ct. at 2215. (citations and footnote omitted).

No showing has been made that application of New Mexico law entails “a specific discrimination against, or burdening of, interstate commerce.” No embargo has been placed on interstate shipments of uranium. Compare Penna. v. West Virginia, 262 U.S. 553 , 43 S.Ct. 658 , 67 L.Ed. 1117 (1923) and West v. Kansas Natural Gas Co., 221 U.S. 229 , 31 S.Ct. 564 , 55 L.Ed. 716 (1911). Unlike other situations in which state regulations have been invalidated under the Commerce Clause,

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there is little likelihood that in the area- of state antitrust laws an excessive cost of compliance will be imposed by piecemeal state regulation. The cost of compliance is nothing more than refraining from the kind of anti-competitive, predatory trade practices which federal law and the laws of virtually all states condemn. The pervasiveness of antitrust regulation in the economy demonstrates a uniformity between state and federal laws which was not present in Exxon Corp. v. Governor of Maryland, supra. Therefore, the New Mexico Antitrust Act was applied consistently with the Commerce Clause of the federal constitution.

2. Preemption by Sherman Antitrust Act

GAC’s second claim is that the New Mexico Antitrust Act is preempted by the Sherman Antitrust Act in the context of this case.

Congress has the unquestioned power to preempt state regulations in the field of interstate and foreign commerce.

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Preemption may be ascertained from the express language of the federal statute,

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by reference to the statute’s legislative history,

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or from a clear inconsistency, repugnancy, or serious danger of conflict between the' state and federal regulations.

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However, none of these sources evidence a Congressional intent to preempt state antitrust laws in the circumstances present in this case.

We begin with the well-established principle that “in a field which the States have traditionally occupied,” “the historic police powers of the States [are] not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress. (Citations omitted.)” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 , 67 S.Ct. 1146, 1152 , 91 L.Ed. 1447 (1947). See also Florida Avocado Growers v. Paul, supra, 373 U.S. at 146, 83 S.Ct. at 1219.

Nothing in the language of the Sherman Act expresses any intent to preempt state antitrust laws, many of which were enacted prior to the Sherman Act. See United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 125, 597 P.2d at 310; J. Flynn, supra, at 90 — 91. The legislative history of the Sherman Act indicates that, rather than intending to supersede state antitrust laws, Congress was seeking to supplement the enforcement of those laws. See remarks of Senator Sherman quoted in United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 125, 597 P.2d at 310. See also H.R.Rep. No. 1707, 51st Cong., 1st Sess. 1 (1890). This legislative history has been interpreted as evidence of a lack of an intent to preempt state antitrust laws. United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 125, 597 P.2d at 310; R. E. Spriggs Co. v. Adolph Coors Company, supra, 112 Cal.Rptr. at 589 .

Preemption may also be inferred where the scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the states to regulate,

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or where the state act touches a field in which the federal interest is so dominate that state regulation might interfere with the federal purposes,

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or where there is a “direct and positive” conflict or repugnancy between the state and federal laws.

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GAC points to no “direct and positive” conflict between state and federal antitrust laws in general, or as the state law has been applied in this case. However, it suggests that if state antitrust laws are applied to interstate commerce of the nature involved in this case, “intolerable burdens” would be imposed on that commerce because of “differing limitations upon competition in each jurisdiction where goods might be produced, transported or sold.”

In Exxon v. Governor of Maryland, supra, the Supreme Court rejected a similar argument, stating that the existence of such potential conflicts is “ ‘entirely too speculative’ ... to warrant preemption.” 437 U.S. at 131, 98 S.Ct. at 2216. The Court went on to say that it is not only “generally reluctant to infer pre-emption,” but also, that it would be “particularly inappropriate to do so” where “the basic purposes” of the state and federal statutes are similar. Id. at 132, 98 S.Ct. at 2217.

The basic purposes of the state and federal antitrust laws in question here are not merely similar; they are identical-“to establish a ‘public policy of first magnitude’; that is, promoting the national interest in a competitive economy.” United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 125, 597 P.2d at 310 (citation omitted). See also J. Flynn, supra, at 138. The state act in question uses substantially the same language as the Sherman Act. J. Flynn, supra, at 139. The state act has been applied consistently with federal actions regarding the cartel and Gulf’s role therein. See n. 50, supra, and accompanying text. There is thus no “clash of competing fundamental policies.” United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 125, 597 P.2d at 310.

GAC suggests that even in the absence of “direct and positive” conflicts between state and federal antitrust laws, the dominate federal interest in foreign commerce precludes application of state antitrust laws to cartel activities. However, we are not interested in this case in regulating foreign commerce; we are concerned with practices that allegedly were aimed at restraining trade in this State. Without full cartel disclosure, we cannot determine to what commerce the cartel’s activities extended. We will not cast aside laws designed to protect the trade of this State without the necessary factual predicate upon which to base a finding that they have been preempted by federal law, particularly where the bad faith conduct of the party charged with violations of those laws has been found to be largely responsible for the missing factual material. See Section III, infra.

GAC also argues that the dominate federal interest in energy matters warrants a finding that state antitrust laws are preempted insofar as they may be applied to anti-competitive practices in the field of energy. However, the concept of preemption based on federal dominance of a subject matter rests on the likelihood that state regulations in the area will interfere with the federal purposes. See City of Burbank v. Lockheed Air Terminal, supra ; Head v. New Mexico Board, 374 U.S. 424, 429-30 , 83 S.Ct. 1759, 1762-63 , 10 L.Ed.2d 983 (1963). The promotion of anti-competitive trade practices in uranium marketing is not part of any federal energy program. See n. 50, supra, and accompanying text, and n. 64, supra. Thus, the prevention of such practices by the states poses no significant possibility of conflict with federal policy.

Therefore, we find no basis upon which to hold that the New Mexico antitrust laws, as applied to the contracts for the sale of uranium at issue in this case, have been preempted by the federal antitrust laws.

3. Scope of the New Mexico Antitrust Act

GAC’s third argument as to the inapplicability of the New Mexico Antitrust Act is that the Act only applies to contracts which are illegal on their face. GAC contends that ordinary purchase and sale contracts-such as the Supply Agreements at issue here-which are fair and enforceable on their face, are valid even if they are related in some peripheral way to an antitrust violation.

GAC relies on State v. Electric City Supply Company, 74 N.M. 295 , 393 P.2d 325 (1964) and Kelly v. Kosuga, 358 U.S. 516 , 79 S.Ct. 429 , 3 L.Ed.2d 475 (1959). We find both cases distinguishable from this case. First, unlike the Sherman Antitrust Act at issue in Kelly v. Kosuga, the New Mexico Act does contain an explicit provision voiding contracts which have as their object or operate to restrict or monopolize any part of the trade or commerce of New Mexico. Section 57-1-3, N.M.S.A.1978 (current version at § 57-1-3, N.M.S.A.1978 (Supp. 1979)) states:

All contracts and agreements in violation of the foregoing two sections [57-1-1, 57-1-2, N.M.S.A.1978] shall be void, and the person or persons, corporation or corporations, association or associations who shall violate the provisions of either of said sections shall be civilly liable to the party injured for any and all damage occasioned by such violation, and any purchaser of any commodity from any individual, corporation or association transacting business in violation of such sections shall not be liable for the payment for such commodity.

By recognizing the defense of contract illegality in this case, we are, rather than creating a new remedy, merely giving effect to the express provisions of the antitrust laws of this State.

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Second, in both Kelly v. Kosuga and Electric City Supply Company, the contracts sued upon had been fully performed, and the courts refused to permit one party to avoid its obligation to pay for the goods it received.

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Thus, in those cases the courts furthered the general policy, as Justice Holmes put it, “of preventing people from getting other people’s property for nothing when they purport to be buying it.” Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U.S. 227, 271 , 29 S.Ct. 280, 296 , 53 L.Ed. 486 (1909) (dissenting). See Kelly v. Kosuga, 358 U.S. at 520-21 , 79 S.Ct. at 431-432 . This policy controlled the Kelly ease. See Viacom Intern. Inc. v. Tandeum Productions, Inc., 526 F.2d 593, 599 (2d Cir. 1975); Comment, The Defense of Antitrust Illegality in Contract Actions, 27 U.Chi.L.Rev. 758, 769 (1960).

No such policy is involved here, for United is not seeking to avoid its obligation to deliver the uranium and yet at the same time recover the contract price for it. In the case of executory contracts, such as those at issue here, the policy of avoiding the unjust enrichment which would result from recognition of an antitrust defense simplv is not relevant. See 27 U.Chi.L.Rev. at 769-71; Lockhart, Violation of the Antitrust Laws as a Defense in Civil Actions, 31 Minn.L.Rev. 507, 573 (1947). Compare Atlantic Richfield Co. v. Malco Petroleum, Inc., 471 F.2d 1258, 1260-61 (6th Cir. 1972) with Associated Press v. Taft-Ingalls Corporation, 340 F.2d 753, 769 (6th Cir.), cert. denied, 382 U.S. 820 , 86 S.Ct. 47 , 15 L.Ed.2d 66 (1965).

Third, the Supply Agreements at issue here are alleged to be one of the means by which GAC and Gulf sought to monopolize the uranium market of the United States. If proven, United’s allegations would establish that the Supply Agreements, rather than being collateral to or independent of the alleged monopolistic conspiracy, were essential parts of a general plan or scheme which the law condemns. Compare Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 546-49 , 22 S.Ct. 431, 434-35 , 46 L.Ed. 679 (1902) with Continental Wall Paper Co. v. Louis Voight & Sons Co., supra, 212 U.S. at 258-62 , 29 S.Ct. at 290-292 . Under such circumstances, the refusal to recognize an antitrust defense would place the court in the position of “enforcing the precise conduct made unlawful by the [antitrust laws].” Kelly v. Kosuga, supra, 358 U.S. at 520 , 79 S.Ct. at 432 . It would be contrary to the public policy of this State to enforce a sale which was in execution or aid of an illegal price-fixing, anti-competitive, monopolistic conspiracy where recovery would aid the alleged law violator to accomplish the very purpose of his illegal agreement.

Finally, we do not read the words in Electric City Supply Company that the contract sued on must “itself [be] tainted with illegality” to mean that the contract must overtly call for some illegal act on its face before the antitrust laws can provide a defense. To the extent that that decision can be so construed, it is inconsistent with the language of Section 57-1-3. See generally Bruce’s Juices v. Amer. Can Co., 330 U.S. 743, 763-64 , 67 S.Ct. 1015, 1024-25 , 91 L.Ed. 1219 (1947) (Murphy, J., dissenting); 31 Minn.L.Rev. at 547 n. 211.

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Based on the foregoing reasons, we find that the contracts at issue and United’s antitrust allegations are within the scope of the New Mexico Antitrust Act.

III.

GAC’S NONCOMPLIANCE WITH DISCOVERY ORDERS AND THE DISCOVERY SANCTIONS IMPOSED FOR NONCOMPLIANCE

In this section of the opinion we examine GAC’s conduct in the discovery process, and analyze both the discovery sanctions and the means by which they were imposed. In light of the complex and lengthy proceedings which led to that judgment, an extensive and detailed examination of the questions presented is imperative. They will be analyzed in the following order:

1. Whether GAC was guilty of a willful failure to comply with the rules of discovery and the discovery orders of the court.

2. Whether findings of willful noncompliance could be made without a hearing.

3. Whether the sanctions entered for such noncompliance were appropriate.

The trial court’s sanctions order and default judgment of March 2, 1978 was entered under Rule 37(b)(2)(iii), which provides that if a party or an officer or managing agent of a party refuses to obey an order issued under Rule 37(a) to answer interrogatories, or an order made under Rule 34 to produce documents,

the court may make such orders in regard to the refusal as are just, and among others the following:

(iii) An order striking out pleadings or parts thereof, or staying further proceedings until the order is obeyed, or dismissing the action or proceeding or any part thereof, or rendering a judgment by default against the disobedient party [.] (Emphasis added.)

The case law in New Mexico is not clear as to whether Rule 37(b)(2) is applicable only to a willful or bad faith refusal to obey orders entered under Rules 37(a) and 34. Compare Rio Grande Gas Company v. Gilbert, 83 N.M. 274, 276-78 , 491 P.2d 162, 164-66 (1971) with Pizza Hut of Santa Fe, Inc. v. Branch, 89 N.M. 325, 326-27 , 552 P.2d 227, 228-29 (Ct.App.1976). We agree with the approach of the United States Supreme Court in Societe Internationale v. Rogers, supra, 357 U.S. at 208-12 , 78 S.Ct. at 1094-96 , where, in construing identical language in Rule 37 of the Federal Rules of Civil Procedure, the Court stated:

For purposes of subdivision (b)(2) of Rule 37, we think that a party “refuses to obey” simply by failing to comply with an order. So construed the Rule allows a court all the flexibility it might need in framing an order appropriate to a particular situation. Whatever its reasons, petitioner did not comply with the production order. Such reasons, and the willfulness or good faith of petitioner, can hardly affect the fact of noncompliance and are relevant only to the path which the District Court might follow in dealing with petitioner’s failure to comply.

Id. at 208 , 78 S.Ct. at 1094. Thus, Rule 37(b)(2) applies to any failure to comply with discovery orders of the type specified therein. However, the sanctions provided by Rule 37(b)(2)(iii), entailing the denial of an opportunity for a hearing on the merits, may only be imposed when the failure to comply is due to the willfulness, bad faith or fault of the disobedient party. See Societe Internationale v. Rogers, supra, 357 U.S. at 212 , 78 S.Ct. at 1096 .

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We have previously adopted the following test of willfulness:

[A] willful violation of a provision of a statute or regulation is any conscious or intentional failure to comply therewith, as distinguished from accidental or involuntary non-compliance, and no wrongful intent need be shown to make such a failure willful. (Citations omitted.)

Rio Grande Gas Company v. Gilbert, supra, 83 N.M. at 278 , 491 P.2d at 166 , quoting from Brookdale Mill v. Rowley, 218 F.2d 728, 729 (6th Cir. 1954).

The trial court in this case made the requisite finding that GAC’s discovery failures were willful. It was based on forty-eight recitals, in which the court described GAC’s discovery failures in detail. The court concluded:

[T]he defendant, General Atomic Company, has followed a conscious, willful and deliberate policy throughout this litigation, which continues to the present time, in cynical disregard and disdain of the Rules of Procedure relating to discovery and this Court’s discovery Orders, of concealing rather than in good faith revealing the true facts concerning the international uranium cartel in which Gulf Oil Corporation was involved and which through its subsidiaries, officers, agents and affiliates, including defendant, GAC, participated . .; the aforesaid policy of defendant, GAC, of hiding that information from the Court and opposing counsel, and in consequence thereof, the exercise of the utmost bad faith in all stages of the discovery process up to the present time, leads the Court to the inescapable conclusion that at this late date, the Court’s discovery Orders will not be complied with by the defendant, GAC, and that this Court is powerless to secure unto all parties to this case either due process of law or a fair trial based upon equality and parity of right and duty unless sanctions under Rule 37 are imposed by the Court at this time.

The scope of review on appeal from such a judgment is

“to consider the full record” as well as the reasons assigned by the Trial Court for its judgment, and to reverse the judgment below, if after such review, the appellate court “ ‘has a definite and firm conviction that the court below committed a clear error of judgment in the conclusion it reached upon a weighing of the relevant factors.’ ”

Wilson v. Volkswagen of America, Inc., supra, 561 F.2d at 506 (footnote omitted), quoting from Finley v. Parvin/Dohrmann Company, Inc., 520 F.2d 386 , 390 (2d Cir. 1975). See also Anderson v. Air West, Inc., 542 F.2d 522, 524 (9th Cir. 1976). Where the judgment involves the sanctions provided by Rule 37(b)(2)(iii),

an appellate court’s review should be particularly scrupulous lest the district court too lightly resort to this extreme sanction, amounting to judgment against the defendant without an opportunity to be heard on the merits.

Emerick v. Fenick Industries, Inc., 539 F.2d 1379, 1381 (5th Cir. 1976). In making this determination, we must consider the entire record,

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and “the totality of circumstances surrounding the failure to make discovery.”

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Before turning to that task, we consider GAC’s argument that the judgment is defective because the trial court adopted almost verbatim the proposed recitals submitted by United. The practice of verbatim adoption of proposed findings is not desirable, but it may be acceptable in some instances. See United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 122, 597 P.2d at 307. Such findings “are not to be rejected out-of-hand.” United States v. El Paso Gas Co., 376 U.S. 651, 656 , 84 S.Ct. 1044, 1047 , 12 L.Ed.2d 12 (1964).

The ultimate test as to the adequacy of findings will always be whether they are sufficiently comprehensive and pertinent to the issues to provide a basis for decision, and whether they are supported by the evidence.

Schilling v. Schwitzer-Cummins Co., 79 U.S.App.D.C. 20 , 142 F.2d 82, 84 (D.C. Cir. 1944) (footnotes omitted). See also United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 122, 597 P.2d at 307.

The verbatim adoption of proposed findings requires the appellate court to “view the challenged findings and the record as a whole with a more critical eye to insure that the trial court has adequately performed its judicial function.” Ramey Const. Co., Inc. v. Apache Tribe, Etc., 616 F.2d 464, 467 (10th Cir. 1980) (citations omitted). See also In Re Las Colinas, Inc., 426 F.2d 1005, 1010 (1st Cir. 1970). This we have done.

GAC did not challenge thirteen of the forty-five recitals of United which the trial court adopted. At least seven others are narrative descriptions of the proceedings which, although challenged by GAC, are uncontradicted by any evidence. Many of the recitals merely described actions the trial court had previously taken or statements it had made in open court; several reiterated rulings the court had made over the course of the preceding two years of proceedings. All of the matters recited were within the personal knowledge of the trial court, and most concerned matters that had been argued before the court in previous hearings. In light of these factors and our conclusion that the findings of bad faith are amply supported by the record, it was not reversible error to adopt the proposed findings of United. United Nuclear Corp. v. General Atomic Co., supra, 93 N.M. at 122, 597 P.2d at 307.

A.

GAC WILLFULLY FAILED TO COMPLY WITH THE COURT’S DISCOVERY ORDERS AND THE RULES OF DISCOVERY

As found by the trial court, GAC’s bad faith in discovery consisted of four categories of misconduct: (1) Its responses to the First Set of Interrogatories; (2) its responses to the Second Set of Interrogatories; (3) its failure to produce Canadian cartel documents; and (4) its conduct regarding the production of the so-calléd “Grand Jury Documents” and “Snyder Documents.” The first area will be examined in the following section. The remaining three areas, which cover events that transpired in the final year of the proceedings in the trial court, will be examined together in a second section.

1. The First Set of Interrogatories

a. The Trial Court’s Recitals on the First Set of Interrogatories

The following is a summary of the contested recitals of the trial court regarding GAC’s responses to the First Set of Interrogatories:

1. The definition section and certain questions of those interrogatories (including questions 30-34 and 69) specifically requested information from the constituent partners of GAC. Neither the definitions nor the questions were objected to within the time provided by Rule 33.

' 2. Gulf was obligated by the terms of the parties’ agreement of March 12, 1976 to produce its relevant business records.

3. Cartel documents were subject to production under the First Set of Interrogatories and the March 12 agreement.

4. No law of Canada prohibited the production of cartel documents as of March 1976.

5. GAC’s first answers to the interrogatories were “wholly inadequate and evasive,” in part, because of the failure to include information on the cartel.

6. GAC agreed in its answer to interrogatory number 69 to produce the business records of Gulf and Scallop.

7. From March 12, 1976, GAC neither identified nor produced cartel documents or information in the possession of Gulf despite its agreement to do so and the court’s order of April 30, 1976 that it comply with that agreement.

8. From December 31, 1975 through September 23, 1976-the date of the promulgation of the Canadian Uranium Information Security Regulations-GAC informed neither United nor the trial court about the existence of the cartel, Gulf’s participation therein, or about Gulf cartel documents in Canada.

9. A good faith, non-evasive answer to the First Set of Interrogatories would have, in whole or in part, eliminated the necessity for the Second Set of Interrogatories.

10. Cartel documents and records were clearly within the ambit and requirement of a good faith compliance with United’s initial discovery demands, and subsequent demands made prior to September 23, 1976.

11. GAC was in default and violation of its obligation to produce cartel documents prior to September 23, 1976.

Before analyzing these recitals, we detail the history of the portion of the proceedings they cover.

b. The Proceedings Through April 1977

On December 31, 1975, United filed its complaint in Santa Fe District Court. On the same day it received leave of the court pursuant to Rule 33 to serve interrogatories on GAC. This, the First Set of Interrogatories, was virtually identical to a set served in September 1975 in the previous action.

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Certain portions of these interrogatories, which later became a key issue in the case, are set forth below.

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Although the interrogatories did not specifically refer to the cartel, the definitions and interrogatories were extremely broad. The definitions defined GAC as including “a partnership [and] its general partners.” In addition to Interrogatories 30 through 34, numerous other interrogatories called for information from the “partnership and the partners.”

Although GAC’s counsel stated in October 1976, that the interrogatories were “in the broadest form that I have ever seen in my years of practice”; although GAC was to concede almost two years later that “interrogatories 32, 33 and 34 relate to every conceivable relationship of uranium to the partnership or the partners”; and although GAC now objects on appeal to these interrogatories as being “literally limitless” in scope-GAC did not timely object to their vagueness, to their breadth, or to the fact that they called for information from the partners.

Three days after the time for filing objections had passed, Gulf and GAC held a litigation strategy meeting in San Diego. Notes of that meeting, which were inadvertently produced to United in this case, reflect a discussion on the topic of “how to reduce discovery by Bigbee [United’s counsel].”

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On the day before answers to the interrogatories were due under Rule 33, GAC sought and received an extension until February 23,1976, to answer or otherwise plead to the complaint and to answer the interrogatories. The court also extended the time for filing objections to the interrogatories, even though it had already expired.

On February 23, GAC moved to dismiss the case for lack of personal jurisdiction. It also moved for a protective order under Rules 33 and 30(b) to stay its obligation to answer the interrogatories until the motion to dismiss was disposed of.

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United refused to consent to the protective order, and GAC did not secure an order based on its motion. The time for filing answers or objections to the interrogatories again passed. On March 10, 1976, United filed its first application for a default judgment under Rule 37(d), alleging that GAC had “wilfully failed to answer interrogatories.”

GAC now seeks to excuse its failure to comply with the February 23 deadline on two bases: First, it had filed the motion for a protective order on that date; and second, on March 4, 1976, United’s counsel agreed that answers would not have to be filed while motions were pending.

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Motions for protective orders under Rule 30(b) “do not have the effect of automatically accomplishing what is sought therein.” Wieneke v. Chalmers, 73 N.M. 8, 14 , 385 P.2d 65, 69 (1963). GAC’s position was aptly described in Pioche Mines Consolidated, Inc. v. Dolman, 333 F.2d 257, 269 (9th Cir. 1964), cert. denied, 380 U.S. 956 , 85 S.Ct. 1081 , 13 L.Ed.2d 972 (1965):

Counsel’s view seems to be that a party need not appear if a motion under Rule 30(b), F.R.Civ.P. is on file, even though it has not been acted upon. Any such rule would be an intolerable clog upon the discovery process. Rule 30(b) places the burden on the proposed deponent to get an order, not just to make a motion. And if there is not time to have his motion heard, the least that he can be expected to do is to get an order postponing the time of the deposition until his motion can be heard. . . But unless he has obtained a court order that postpones or dispenses with his duty to appear, that duty remains. Otherwise, ... a proposed deponent, by merely filing motions under Rule 30(b), could evade giving his deposition indefinitely. Under the Rules, it is for the court, not the deponent or his counsel, to relieve him of the duty to appear.

See also Twardzik v. Sepauley, 286 F.Supp. 346, 350 (E.D.Pa.1968) (“we criticize the filing of a motion for a protective order on the very day on which the depositions were scheduled”); Jefferson v. Greater Anchorage Area Borough, 451 P.2d 730, 734 (Alaska 1969).

The alleged agreement between counsel of March 4, 1976, is largely irrelevant since GAC was not defaulted on the basis of this original failure to answer. In any event, any agreement reached on that date to relieve GAC of its obligation to answer the interrogatories does not alter the fact that ten days earlier GAC had failed to meet a deadline set by the court.

United’s first motion for a default judgment was not acted upon by the court because the parties signed a written agreement on March 12, 1976, whereby United agreed to withdraw its motion for a default judgment. GAC in turn agreed to “answer in good faith” the interrogatories. Counsel0 for Gulf also signed the agreement, consenting to an extension of time within which United could answer or otherwise plead to a federal declaratory judgment action Gulf had filed against it the previous month.

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The agreement provided that documents called for by the interrogatories would be produced at GAC’s San Diego headquarters instead of being supplied with the answers, but it made no mention of the fact that the interrogatories specifically requested information from the partners. The agreement specified that if claims of privilege were to be made as to any documents, the grounds for such privilege would be “set forth in the answers to Interrogatories.” One section of the agreement stated that certain documents could be only generally identified. It gave as an example “two boxes of correspondence relating to miscellaneous Gulf activities.” On the basis of this language, the trial court ultimately found that Gulf had expressly agreed to produce its relevant documents.

On April 5,1976, GAC filed its first set of answers to the First Set of Interrogatories. The trial court ultimately found these answers to be “wholly inadequate and evasive” because, for the most part, information concerning the uranium business activities of the individual partners was not provided, and no mention of the cartel was made. The answers did not, as specified in the March 12 agreement of the parties, set forth the grounds for any claims of privilege as to unproduced documents. The answers also did not contain objections to any of the interrogatories or definitions.

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Despite its agreement to answer the interrogatories in good faith and its promise to produce documents in June, GAC filed a motion on April 16,1976 to stay all proceedings, including discovery, pending the outcome on appeal of GAC’s challenge to the court’s jurisdiction. The trial court granted GAC’s motion as to any new discovery by either party. However, the court held that since GAC had agreed to answer United’s interrogatories and to produce documents responsive to the interrogatories, it was bound by that agreement. United warned that it would file a motion for sanctions “if we do not get the documents and if . . . there has been a failure to make the discovery agreed to.”

As scheduled, document discovery began at San Diego. It continued through the first week of August. It resumed in mid-September and finally ended in mid-October. During this period of discovery, several million pages of documents were made available to United, who copied almost two hundred thousand pages. GAC argues that the number of documents it produced during that summer refutes any notion that it was acting in bad faith, but neither cartel documents nor any other documents which were then in the custody of the individual partners were produced. The quantity of material produced does not relieve a party of the obligation to produce what is requested.

In August 1976, United filed its second application for a default judgment, alleging that GAC had failed to comply with the March 12 agreement, had filed answers to the interrogatories which were “so evasive and unresponsive . . . as to constitute a failure to answer,” and had failed to properly make claims of privilege as contemplated by the agreement. However, neither this application nor the briefs in support of it mentioned GAC’s failure to produce documents in the custody of the partners, or specifically, the failure tx> produce cartel records.

A hearing on the application for a default judgment was set for October 1, 1976. One week before the hearing, the Canadian Government promulgated the Uranium Information Security Regulations. The Regulations generally prohibit the release of information contained in documents located in Canada concerning discussions taking place between January 1, 1972 and December 31, 1975 relating to various aspects of the uranium business. See n. 41, supra. The Regulations were adopted for the express purpose of preventing the production of cartel-related information in American courts.

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Two days before the October 1 hearing, in a memorandum filed in support of its second application for a default judgment, for the first time, United specifically pointed out that GAC had failed to produce documents in the possession or custody of the individual partners, Gulf and Scallop, as required by the First Set of Interrogatories. On October 26, 1976, GAC for the first time informed the court that it did not consider itself obligated to supply documents “held individually” by the partners. GAC also argued:

Whether or not the answers to the interrogatories are true or false involves the ultimate issues of fact in this case. .

The correctness of defendant’s answers to interrogatories is not within the scope of the issues to be determined at this hearing. . . .

. . . [T]he issue in question . . . is whether or not defendant wilfully failed to answer the interrogatories. The issue is not whether defendant’s answers are factually correct.

This is not a correct statement of the law.

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On November 30, 1976, the trial court denied United’s second application for a default judgment. But the court stated that the denial was without prejudice to the plaintiff’s right to apply to the court to compel “full, detailed and complete discovery responses,” or “for appropriate sanctions for the failure of the defendant partnership or either partner thereof to comply with specific orders of the Court directing discovery.” (Emphasis added.) The court held that the right to discovery “exists against ... a party partnership and the individual partners comprising the partnership, and the agents, servants, employees, directors and officers of a party or partner.” (Emphasis added.)

United then moved to compel further answers to the First Set of Interrogatories and for the production of documents from GAC and the individual partners. GAC responded by contending that it had “no obligation or ability” to furnish documents in the possession of the partners, a point decided against GAC in the November 30 order. GAC’s statement that it had “no ability” to produce partner documents was false, since less than four months later it began to produce those records.

In early January 1977, the court set a deadline of July 1, 1977 for the completion of all discovery, to which GAC made no objection. The court granted United’s motion for supplemental answers to its First Set of Interrogatories and for the production of partner documents. It set a deadline of April 15, 1977 for the filing of the answers, stating that it expected “a good faith answer . . ., a complete answer, a non-evasive answer.”

GAC informed the court that none of Gulf’s or Scallop’s documents had been reviewed, although the court had held on two previous occasions that the partners were subject to discovery. The court reaffirmed that ruling at two other hearings in January 1977.

GAC then informed the court that

there are some problems that Gulf has in getting materials from Canada because there are some regulations and statutes that forbid transportation to the United States. There are a lot of problems that would be involved in some of the Gulf documents.

The court ordered GAC to make “specific objections.” However, GAC did not at that time inform the court of the Uranium Information Security Regulations promulgated almost four months earlier.

At another hearing in January, GAC argued that even if the court could order production of “partnership related” documents in the possession of the partners, it could not require the partners to produce “non-partnership” documents. The trial court rejected this distinction. Although GAC’s counsel told the judge, “I understand your position,” GAC raised the very same objection one month later.

In February 1977, United moved to compel the production of documents Gulf had produced in cartel-related litigation in Pennsylvania (the Duquesne documents),

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and to the federal grand jury in Washington, D. C. (the Grand Jury documents), which was then investigating Gulf’s participation in the cartel. In response, GAC reargued the issue of the production of “non-partnership documents,” and for the first time suggested that the production of such materials would require the disqualification of United’s counsel. Again GAC alluded to “a serious legal problem with respect to the partnership’s ability to produce foreign documents,” but it did not elaborate on this point. A week later, GAC finally raised the Uranium Information Security Regulations and the Ontario Business Records Protection Act as a bar to the production of Gulf Canada’s records. However, it said nothing about the fact that those records included information on the cartel.

United’s motions to compel the production of the Grand Jury and Duquesne documents were heard on March 7, 1977. Again GAC reargued the question of the production of the partners’ “non-partnership documents.” It informed the court that it was producing the first of Gulf’s records that very day, despite at least four prior orders of the court that the partners were subject to discovery, and despite an earlier court order that production of the partners’ documents begin on January 24, 1977 and proceed “diligently and . . . continuously” thereafter.

At the end of the March 7 hearing, the court granted United’s motions for the production of the Duquesne and Grand Jury cartel documents, stating that they were “already covered” by its previous orders. The court again held that any specific documents subject to “good faith” claims of relevancy or privilege had to be made in accordance with its prior orders. Again the court insisted that “there be full and honest, good faith discovery available to all parties.” And he warned:

If that is not done, I assume that some party is going to file a motion for a default judgment, and . . . if I become convinced that there has been any, any invasion of good faith discovery, I would certainly look long and hard at a Motion for Default Judgment.

Eleven days later, GAC finally moved to disqualify United’s counsel. See Section IV, infra.

On April 15, 1977, GAC filed approximately five thousand pages of supplemental answers to the First Set of Interrogatories. However, not a single word was said of the cartel or Gulf’s role in it, nor was there any claim that cartel documents were privileged, irrelevant, or protected from disclosure by Canadian law. GAC did file objections to I&M’s request for the production of depositions of Gulf cartel participants which had been taken in the Duquesne litigation, and any exhibits attached thereto. GAC stated that production of this material, which was located in the United States, “would be violative of Canadian law,” despite the fact that six weeks earlier it had informed the trial court that Canadian nondisclosure laws did not apply to documents in the United States. Twelve days later, GAC withdrew these objections.

It is in the context of the foregoing chronology of events that we examine the recitals of the trial court concerning GAC’s answers to United’s First Set of Interrogatories.

c. Analysis of the Recitals on the First Set of Interrogatories

We hold that each of the recitals of the trial court is supported by the record.

The fact that the interrogatories called for information from the constituent partners of GAC is apparent from the plain meaning of the words in which they were written. See n. 80, supra. GAC did not object to this language, either within the time provided by Rule 33 (January 10, 1976), or within the extension of time granted by the trial court for the filing of objections (February 23, 1976).

The law is well established that the failure to timely file objections to interrogatories operates as a waiver of any objections the party might have.

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This rule is generally applicable “[rjegardless of how outrageous or how embarrassing the questions may be.”

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When a party fails to file timely objections, the only defense that it has remaining to it is that it gave a sufficient answer to the interrogatories.

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GAC’s first answers to the interrogatories almost totally failed to include information concerning the uranium activities of the partners despite the wording of the interrogatories. See n. 80, supra. Under the rules, if the interrogatories do not assign a particular meaning to the phrases they contain, the answering party is obligated to answer the interrogatories in “the ordinary, everyday usage and meaning” of the language in which the questions are asked. Roesberg v. Johns-Manville Corp., 85 F.R.D. 292, 298 (E.D.Pa.1980). These interrogatories did not assign a particular meaning to questions calling for information from the partners which would support the limited construction GAC gave to them. Therefore, the trial court was correct in finding those answers to be “wholly inadequate and evasive.”

GAC’s explanation for this failure is without merit. It contends that because the partners were dropped as parties when the case was refiled on December 31, 1975 (see n. 2, supra), discovery could only be had from the partnership itself. However, GAC could have attempted to work out the matter with opposing counsel, or failing that, presented its objection to the trial court; it did neither. GAC simply made its own unilateral legal determination of the propriety of the questions asked. It later informed the court that it had “construed the interrogatories to be consistent with the information to which plaintiff was entitled under the rules,” which it defined to be only those documents which were in the custody or control of GAC. This practice is universally condemned. Cf. United States v. Board of Trade of the City of Chicago, Inc., supra, 18 F.R.Serv.2d at 319 (“The proposition that an adverse litigant may not unilaterally determine the scope of discovery needs no citation”); Fond Du Lac Plaza, Inc. v. Reid, 47 F.R.D. 221, 222 (E.D.Wis. 1969) (“It is inappropriate for the party to determine on his own that the subject matter of the inquiry is ‘premature’; thus, it was the plaintiff’s responsibility in this case to answer the interrogatories or to seek relief from the court”). See also Cohn v. Dart Industries, Inc. v. Kavanagh, 21 F.R. Serv.2d 792, 794 (D.Mass.1976). Armour & Co. v. Enenco, Inc., 17 F.R.Serv.2d 514, 517-18 (W.D.Tenn.1973); Cardox Corporation v. Olin Mathieson Chemical Corp., 23 F.R.D. 27, 31 (S.D.Ill.1958); C. Wright & A. Miller, Federal Practice and Procedure § 2173, at 544 (1970).

GAC’s unilateral construction of its discovery obligations constituted bad faith. In Hunter v. International Systems & Controls Corp., supra, 56 F.R.D. at 622, the court said:

The refusal to give the information on the ground that the,defendant unilaterally and without seeking a ruling of the Court concluded [that the information sought was objectionable] constituted a wilful obstruction of discovery when defendant was possessed of the information (as it now admits). . . . [Defendant could have objected and sought clarification of its obligation to answer but did not.

The court went on to say, in language applicable to this case:

[I]t is found that this misconstruction and failure to make discovery was a callous disregard of discovery obligations, and a designing, self-serving unilateral construction of interrogatories 30 and 31. The wording of the interrogatories and answers themselves would not lead to any other reasonable conclusion.

Id. at 625 (footnote omitted). The court concluded:

[I]t is a dangerous practice which incurs the risk of possible sanctions for a party to limit an interrogatory addressed to it to only a portion of the information which it explicitly requests.

This text is long and has been trimmed here. Open the source document for the complete record.